Claims Clinic: Drive time

Motor has been insurers’ biggest headache in the claims arena during 2010, with a spate of companies reporting spiralling bodily injury bills. It was appropriate, therefore, that the 2010 season of claims clinics should conclude by focusing on the thorny topic.

Insurance Times deputy editor David Blackman kicked off the event, which took place at Vinopolis on London’s South Bank, by quizzing panelists on the likely impact of the Jackson Review of civil litigation costs.

Pointing to rising personal injury costs, ABI policy adviser for compensation Samantha Ramen said legitimate claimants did not get compensation quickly enough under the existing civil justice system, which she described as “dysfunctional”. Cases that cost £5,000 in legal fees were delivering just £2,000 in claimant compensation, she said.

“The ABI believes the recommendations of Lord Justice Jackson – as endorsed by Lord Young – will, if implemented, have a significant impact in tackling this problem,” said Ramen, speaking during the run-up to the launch of the Ministry of Justice consultation paper on implementing the Jackson recommendations.

“We believe Lord Justice Jackson’s report was a comprehensive, evidence-based and objective consideration of the civil litigation system as a whole,” she said. “It took a pragmatic approach to addressing issues for both claimants and defendants, and was undertaken by a senior and respected member of the judiciary. As such, his recommendations should be given the weight they deserve.”

Ramen acknowledged that parts of the Jackson Review would be a blow to the insurance industry – an uplift of 10% on general damages, for example – but insisted it was important for the government to implement the reforms in full.

“Although it would be very easy for the insurance industry to cherry-pick the parts of Jackson we prefer, we’re not playing that game,” she said.

“We want to see the Jackson recommendations implemented as a package, and in full, and we would like the government to deliver this package in an ambitious but realistic time frame.”

RTA system feedback

Turning to the MoJ’s recently introduced system for dealing with low-value road traffic accident claims, she said feedback from insurers had generally been positive.

The portal, through which she said more than 200,000 claims had been processed since the system’s launch on 30 April, was helping victims achieve faster compensation with reduced costs.

But Zurich motor claims director Karl Helgesen said it was too early to tell if the process would lead to reduced costs. Zurich had only settled 8% of the claims it had received through the portal so far, he pointed out.

He said settlement values for general damages had not changed much as a result of the portal’s launch. “Greater savings could be experienced in the future as we see the settlement of higher value cases over the coming months,” he added.

Helgesen said claimants had not been disadvantaged by the process and the portal made it easier and faster to decide liability. “Liability decisions are being made by Zurich within 15 days, possible fraudulent cases are being identified earlier and removed from the process, and the new process has allowed us to ensure cases that should stay in the process do so – hopefully with a consequent saving in costs.”

On the portal’s much-publicised early glitches, Helgesen was sanguine. “Generally, Zurich believes the teething problems have been overcome, save for a few temporary blips.”

The key to making the system work was to spend time training staff properly, he added. “We’ve invested in excess of 13,000 hours in staff training to manage this process, and the process has clearly defined rules and timescales that should cause no problem to the initiated,” he said.

Helgesen also said employers should have clear guidelines on which cases remain in the system, that they should settle cases on a realistic first-offer basis and that they should communicate the importance of the system to their customers.

Credit hire issues

Moving on to credit hire, Helgesen commented that several companies in the sector had seen financial restructuring over the last 18 months. “The industry appears to be becoming more polarised, with some showing interest in open dialogue and seeking the removal of frictional cost from the negotiation process,” he said.

SAS pre-sales consultant Scott Thompson said that by using analytics, insurers could better estimate the cost of a claim and how long it would take to settle.

Heath Lambert claims director and Biba motor panel member George Nicol questioned whether the portal could be used to provide management information for clients.

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Helgesen said Zurich captured its own management information internally and was aware of the total number of the company’s claims going through the portal. But he said the insurer did not yet provide this information to clients.

“In an ideal world, we would like the portal to provide more general management information so we can have a relative benchmark and see how we’re performing across the industry,” he said.

“We can show customers how many claims that are going through the portal stay within the process. We can also talk to our customers around those where we have our greatest issues with regard to unreported claims – we have that level of data.

“The issue is that it’s too early in the process and we need to give it more time so we can have some tangible output to show customers and prove the difference.”

Extending the limits

Insurance Times’s Blackman asked if the government should take up Lord Young’s recommendation that the portal’s upper limit for motor claims be extended and the entire system expanded to include other types of liability, such as employers and public. Zurich’s Helgesen said: “We’d be very happy for it to be extended up to £25,000, particularly if the fixed costs, as they are, stay in situ.”

Groupama claims director Phil Bird agreed that the portal ceiling should be lifted to £25,000, with the inclusion of larger claims improving the quality of management information around cost savings.

“That would make sense.” he said. “I’m less concerned about the extension into other areas of liability and the 15 days’ investigation of liability for those incidents because I think by their nature they are less clear cut.”

IBM associate partner Graham Jackson wondered if there should be league tables published for insurers based on the figures generated by the portal.

Helgesen said: “I think there would probably be some concern around commercial sensitivity. If they were on an anonymous basis, there would be some merit in that but, so long as you have an average as a comparative position, I think that would be acceptable.

“Would we be happy having all our core metrics on full view? Probably not. But we would welcome a view of how we do compare generally across the market,” he added.

But he said it was difficult to compare one insurer with another. “It’s difficult to tie down and compare apples with apples. Different insurers have different distribution routes that will affect time to settle.” For Bird, a simple league table would be “facile”. “I’m not sure what league tables tell you, in the end,” he said.

Whiplash reactions

Blackman asked the panel for their feedback on recent comments by Motor Insurance Bureau chief executive Ashton West that there should be a review of compensation for whiplash.

The ABI’s Ramen said: “At the moment, you go to a doctor, who says whether you have whiplash or not. We want to see something more objective, because whiplash is a big problem here and makes up a lot of bodily injury claims.”

She added that the ABI was looking to lobby the government on the issue and was consulting its members.

Helgesen highlighted the difficulty of identifying whether minor whiplash claims were genuine or fraudulent.

Aviva divisional managing director for general insurance Matthew Briggs predicted a negative response to any attempts to review the status of whiplash as a compensatable injury. He said: “Claimant lawyers would have a big issue with that, and experts are paid to give a prognosis on the injuries. If we’re going to rule out expert advice, that opens a big can of worms.”

However, Broker Direct non-executive director Neil Harris argued that the industry should be more hard-headed on the issue. “Insurers should be standing up much more robustly for the interests of policyholders. It’s alarming to me that we are not looking at slashing claims costs in these small injury claims. I think the industry should be more upfront and take this issue on.”

Briggs responded that the issues surrounding compensation were complex. “We have educated society and given it easy access to making compensation claims, whether we like it or not.”

Validus head of business development Brian Pearce said: “Is the compensation culture being driven by the consumer, or those making money out of it? They are encouraged to make a claim that they probably wouldn’t make in the first place. Who’s driving the culture? Some of these companies are FSA-regulated.”

In conclusion, Ramen said: “Lord Young has identified claims management companies as being a particular driver of the increase in claims. None of us can deny they’re quite aggressive with their marketing – text messages, daytime TV advertising, full-page adverts in newspapers. And a lot of the time there is an immediate incentive.

“I know the government is very concerned about this and is looking at how to deal with this issue.” IT