Legal blog: Regulation and reform must apply to all

There is an old expression about “not airing your dirty linen in public”. This is particularly true when, at the same time, you are seeking concessions and support on a connected matter.

Two documents released in recent weeks have placed the insurance industry under the media spotlight at a time when lobbying government on transactional cost in motor insurance has never been as important.

The Office of Fair Trading (OFT) report on private motor insurance opens with a provisional decision to refer the UK market for the supply or acquisition of private motor insurance to the Competition Commission (CC). The OFT’s market study gave it reasonable grounds to believe that there are features of the private insurance market that prevent, restrict or distort competition. This is to the detriment of the end-consumer and layers cost in an already dysfunctional market.

Media coverage of the OFT report was short but pointed clearly at UK insurers. While most insurers would acknowledge that a dysfunctional market has encouraged them to behave in a manner that they would rather not, let us not forget that the market includes more than just motor insurers.

Garages, credit hire companies and recovery agencies all play their part in distorting the market and layering additional cost for the consumer. No doubt that is why Nick Starling of the ABI welcomed the report providing that it leads to the regulation of all players in the market, and it is hard to disagree.

It will be interesting to see how this progresses but a referral to the CC seems almost inevitable and will bring both credit hire and repair costs under close scrutiny, which should be welcomed.

On that latter point, the RSA test case judgment was handed down on 15 June by the Hon. Mr Justice Cooke. The judgment relates to three preliminary issues:

• The measure of loss – is this the reasonable cost of repair?
• Test of “reasonable repair charge” – is this the measure of the cost that the claimant could obtain or the cost that the insurer could obtain?
• Recoverable amount – if the cost to the insurer and that cost is reasonable, then is this the recoverable amount?

Mr Justice Cooke found for RSA on all counts – a judgment that seems inevitably destined for the appeal courts and more adverse media coverage for the insurance industry. This may well be seen to have been unavoidable, but whatever the merits of the various and complex arguments, the timing of this judgement does not assist the industry.

Challenging times for FOIL as it celebrates 20 years

On a lighter note, the Forum of Insurance Lawyers celebrates its 20^th anniversary this year. FOIL has evolved over that period and now faces probably the most challenging 12–18 months since its inception. The Jackson proposals, other associated government-led PI reform, Löfstedt and the Legal Services Act mean that FOIL is more active and engaged today than it has ever been. It has never been so important for defendant solicitors to have a strong voice in the market and to show a cohesive position in support of our own professionals and our clients.

FOIL will continue to press the case for reform and the reduction in transactional costs in delivering compensation to genuine claimants. We will continue to support the fight against fraud and look to help deliver a claims process that places the injured victim back at its centre and seeks to deliver redress swiftly and in a less adversarial environment.

FOIL cannot stand still. We must strive to make it more relevant and initiatives such as links to the Chartered Insurance Institute support those endeavours.

We now await the government’s consultation paper on raising the small claims track limit and issues relating to medical evidence for whiplash claims. We expect that paper in mid-July. Much work will take place over the summer months, and once the government returns in the autumn many pieces of the Jackson jigsaw will start to fall into place, revealing a landscape for next April. Enjoy your summer holidays … the autumn will be busy.

Don Clarke, president, FOIL