Panel
Chair: Elliot Lane, deputy editor Insurance Times Alan Jacobs, partner and head of insurance division (Birmingham) DLA Daniel Pollick, IT director, DLA David Williams, claims director, AXA Insurance Dominic Clayden, director of technical claims services, Norwich Union Angus Tucker, director of business insurance consulting, Deloitte Stuart Willoughby, claims director, Markel International Max Carruthers, joint chief executive, Rubicon Richard Mikula, managing director, Topaz Insurance Brokers Cherry Marshall, quality project manager, AXA Assistance claims centre Michael Faulkner, senior features reporter Insurance TimesDominic Clayden: Insurance sits within a social context. There are people who we have to collect premiums from and these claims have to be affordable. We then pay out the vast majority of that money to people who have legitimate claims, and part of what the debate should be is how we can efficiently give people true compensation or true settlement of claims. I think to some degree we've got trapped into considering the process. We're at a point where there does need to be a fundamental re-evaluation of issues, like do solicitors add value in volume personal injury pre-proceedings? These are hugely expensive resources which are draining costs out of our premium pot which we have to collect, and I'm not sure they're adding the value that we think they are.
Angus Tucker: Six months ago I had to take a friend of mine into hospital and while I was waiting in outpatients I became aware that all round the wall of the outpatients waiting room that there were loads of leaflets from a local firm of solicitors, which said "Whatever you're here for, somebody caused it, give us a ring and we'll sue them". That's part of the culture that we have to deal with.
DC: We've reached a situation, which Angus raises, that when you enter an accident and emergency department there is a lawyer waiting for you. You pull the curtain back and they're standing next to the doctor because it's better to get the witness statement at that point. We need to be honest about what the solicitors are in this for – to make money out of every possible potential claim. We have to query as a society, do we want to live in that environment? But in terms of the insurance context, are they doing anything different from a loss adjuster? It's claims handling, it's not skilled legal work that's being carried out, but it's being charged at a disproportionately high rate. Until recently, and still in most classes of business in insurance, solicitors are paid like plumbers, the more hours they do the more they get paid. What we have is a huge focus on the process, a huge focus on the lawyer's costs, but less focus on the person that has been injured and on resolving his problems. We have reached the point where the lawyers are getting in the way of resolving what we should be doing, which is looking after the claims.
Daniel Pollick: What you're saying is that the claims environment at present should move towards rehabilitation?
DC: There is an argument for rehab. But in low value claims, most claimants want the issue resolved quickly. Most complaints are based on: "This took 18 months, why wasn't it resolved in two weeks, three weeks. It was a routine whiplash, why has it taken 18 months?" We have to look at the process, both from claimant lawyers who are looking after the claimaints' interest and, indeed, how we as an industry react.
Richard Mikula: You find that a lot of these claimants with whiplash, looking at it from the personal motor side, become involved with solicitors and after six months they're then back on the phone, saying: 'Well, look, I don't really want to pursue this any further because it's just going on too long'. They then get a letter from the solicitor saying 'Oh don't worry about that, we're still pushing, we're still fighting'. Then two years down the line they end up with their £1,500 and the solicitor's receives £7,000 because he pushed it all the way through the courts and claims process. So I think if the insurers jumped on the bandwagon a little bit quicker and took over the handling of the claim rather than let the solicitor continue with that claim, it could be settled in a very short period of time.
David Williams: The insurance industry has a poor reputation and while we can sit here and think wouldn't it be great if we could cut out a huge amount of the work that claimant solicitors do, I think we're sadly past being able to achieve that. What we have to do is to accept that, unfortunately, there are some people who are always going to add a layer of cost to the compensation, and what we have to find ways of working with them. I have been quite abusive towards the claims farmer community. But now there is a new breed of people who have better weapons – they are media-savvy. More so than we are. We've taken an absolute panning, but now we're going to fight back.
RM: We've created this problem over a long period of time. Where claims have been proven to be fraudulent, nothing has been done about it. We've now started to look at prosecuting the people that are producing the fraudulent claims, then the media will get hold of that. Alright, we're going to get negative publicity for so many months, but then it will filter through to the general public 'Well, the insurance companies aren't an easy touch any more'.
Alan Jacobs: It's ironic in a way because many claims farmers were just a grouping of claimant lawyers who thought 'well, we've been shown how it can work and we want a bit of that action, but we'll do it ourselves'. Part of the problem is that the claimant side of the business is too diverse to be able to get the kind of agreement and controls that you might want, because there's still going to be the guy on the high street who does a bit of personal injury work. He has maybe 50 cases a year and still relies on ramping up the costs from the low number of costs that he has.
Max Carruthers: But how do you move that weary insurer warhorse along at the pace of the other side. These guys, by process of natural evolution and nothing else, are very efficient, very smart, and very entrepreneurial.
DP: It's a strategic problem, not a tactical problem. If you get better tactics, stick them all in a shed on a ringroad, pay them less, keep them mean and lean. But all that does is create the arms race on the claimant side. It's more of a strategic problem. Imagine if you could invent a world where the insurer said OK well the claimant lawyers are putting the cards in the casualty departments. How can we fight that? Well what if the industry under the ABI, say, created a collaborative entity that said if you've been injured, come to us and we'll process your claim and we'll try to eliminate the adversarial process entirely.
DW: I have some concerns that if we manage to grab all these third parties and settle claims, they would never be finally settled if they didn't have some form of independent advice. That's why I'm saying we have to be more collaborative with these people.
MC: At the risk of being contentious, we're finding that the insurer is both pursuing the claim and defending it.
Chair: Do you think mediation is a way forward? Insurers and lawyers have been trying to increase the amount of mediation that's been going on, but from what I understand only a very small number of cases have been mediated.
DW: No one in this room would say mediation is morally wrong. It just makes sense with what we're talking about. Why can't we find out why it's not succeeding. I have a very bitter view that the claims farmers don't like it whatsoever, because it can bring a rapid solution.
AJ: A major problem is that lawyers are trained in the process of litigation . Nowhere are we trained to identify when a case is suitable for mediation.
DC: There are a lot of claimant lawyers out there handling volume work whom I'm not sure are capable of discussing settlement. Why? Because they have dumbed down the processes to the point where, unless the IT package drives them down a certain route, they can't actually look at short-circuiting it.There are large personal injury cases which are capable of mediation. They are also capable of a whole range of ADR routes without the formal need for mediation. As an insurance company, you should be meeting the claimant and understanding their injuries and their problems. If it reaches mediation, it's usually going to be a dispute between experts that needs resolving.
Chair: Can mediation help in EL cases? Wouldn't it be a better solution?
AJ: That's a particular area where potentially there is an ongoing relationship with employer/employee, that can be really quite powerful. The employer can help in a mediation by possibly saying sorry, which I know sounds old and haggard, but in practice it is remarkable how often that can move a case to settlement in a mediation. Another way of helping is to offer part-time work or look for a solution which fits both parties.
DW: The DWP second report on EL talks about alternatives to litigation. I hope it's more than just some nice words. If there is a way in which a certain classic type of claim can be directed away from the conventional adversarial route towards something which combines mediation and rehabilitation, then that would be encouraging. But of course there's never any detail in these reports. I'm desperately waiting to see what they're actually talking about.
AJ: We're running a campaign with the industry at the moment where we have signed up 15 insurers to produce five cases for mediation over the next year. They have agreed to share the information from those cases so that we can prove the average settlement time in one of these cases and the overall claims spend is lower.
DC: In EL, brokers are having to fund significant increases in premium. Are all the rate increases equal across the industry? No, of course there are some which are more specific to risk. That's one of the drivers that technology has given us in an underwriting environment. We are able to identify risks better. But in EL we have this issue that it can't continue in the current projections in terms of cost. There is government pressure, which always helps, but there is a political will to actually address the problems in EL, which are different to what's happening in motor. We haven't had the same political pressure.
RM: Yes, but also the clients have now found ways of making that money back. Where you had a small scaffolder, he was priced out the market. He's now joined forces with, say, three or four other small scaffolders, so you now have one company. So you've opened yourself up to more claims by doing that. And you have created a problem rather than solved one.
MC: I still think the ATE market has a place in the industry. Insurers can say the government's created this mess in the first place by abolishing legal aid, changing the whole structure and making people more independent. The insurance industry can remedy by putting legal expenses back into play.
DW: As technology becomes smarter, it can help a lot of the things we've been talking about. The problem with lie detectors is that they are very threatening. My understanding of the lie detector systems is that they also take a long time - you can't just plug somebody in and get a red or a green light.
Cherry Marshall: We have been trialling fraud risk management training and, as you say, the interviewing process. It's been proven that the more open you are with the claimant, they're likely to tell you everything. They lay it bare straight in front of you that it's a clear fraud. The lie detector on the phone - that never works, or it doesn't work as well. But no matter what technology you put in place and what checks you have in place, it's always down to the individual, the training and the skills.
DW: If you're somebody who suffered an injury, you are probably more concerned about getting a fair level of compensation quickly than have an inspector from the insurance company come round and visit, particularly when you're looking at EL.
Chair: Is outsourcing to India the answer?
DW: People are moving things to India without sorting the processes out and that concerns me. You can produce some massive savings by getting a member of staff in to do something because they are so much cheaper, and it staggers me the staff on costs for things in India.
