Legal blog: Tensions behind claims evolution

As I near the end of my presidency, I have inevitably looked back on the events of the past 12 months.

We are in the thick of massive changes to the claims and legal landscape as government pushes on with its change agenda. The desire to reduce costs without affecting access to justice is driving many agendas and it has been fascinating to see how the different stakeholders have reacted.

For the claimant community, it has been largely bad news. The effective abolition of after-the-event and success fees alone would have brought about significant change to the dynamics of how claims are pursued, but the recent announcement of a referral fees ban will have a seismic effect.

While government has yet to identify exactly what will be captured by the ban – for example, will the offer to do other work at a reduced rate in lieu of paying a referral fee be caught – the net effect will almost certainly be that claims currently in the system driven by organisations that benefit from a fee payment will disappear.

Those claims will either go back into the general mix around before-the-event cover or the more speculative of them will disappear completely. Claimant solicitors must determine what their future business model looks like. I predict a contraction in the number of firms operating in this area, with consolidation among those remaining.

The RTA portal

It isn’t all good news for defendants either. Insurers are facing an almost impossible task to recover costs against an unsuccessful claimant, as well as a general uplift in damages awarded to individual claimants.

The roll-out of the RTA portal and its possible extension to £25,000 has put pressure on insurers’ infrastructure in turning these claims around. By the end of this month, we may hear that the government will extend that portal to include employers’ liability and public liability claims. 

The general view is that the RTA portal has been successful in simplifying the claims process and speeding up resolution. This must be good news for consumers. But extending it to EL and PL claims will be a challenge for insurers to deliver unless time limits are significantly longer than those in RTA.

The abolition of referral fees and undoubtedly the reduction in recoverable fees by a claimant’s solicitor will benefit insurers and should genuinely remove cost out of the system, hopefully, resulting in a decrease in premiums for consumers.

Time for the one-stop-shop?

As for the legal profession, it is embarking on the alternative business structures journey. It is disappointing that the SRA has still to announce when it will be an effective licensing body. Will we start to see one-stop insurer claims/litigation vehicles appearing?

Much depends on public perception around independence and the insurers’ perception of possible brand damage. It must be an option they at least investigate.

More haste, less speed

So where will we be in five years’ time? I suspect there will be fewer and larger process-efficient businesses settling claims within weeks rather than months, with even more of a move towards strict liability in employers’ liability cases.

I don’t mean that government will legislate on the point but that the more routine cases going into a portal – if that’s what happens – will be settled quicker and more cost effectively than by litigating them. We will see an acceptance that certain types of claims will be settled early on in the process. 

The look of legal advice

I hope we see a breaking down of the claimant v defendant culture, which doesn’t serve anybody. That could be accelerated if we had a common valuation tool, as so many disputes seem to be over relatively small differences of opinion about the value of general damages.

Will we see more back-office processing in law firms moving to cheaper servicing locations? Lawyers in the insurance sector are under continuing pressure on margins, so the search for process efficiency and overhead cost reduction will remain. Almost certainly those lawyers practising in niche areas will continue to be valued and needed for their expertise, but perhaps even those firms will move further towards commoditisation in pricing the cost of that advice.

The shape of things to come

For insurers, time will tell whether they see that outsource partnerships deliver real benefit, leaving them to focus on their core activities, or whether they continue to look to retain those functions in-house. 

For the legal profession, I envisage it will be smaller in terms of new entrants and probably more polarised in terms of expertise, with a handful of firms dominating core sectors. Firms will, hopefully, be fully focused on truly adding value to resolving issues and facilitating business community activity.

What is certain is that the evolution of claims and litigation will continue and the drive towards fairness and efficiency will remain key tensions within the system.

Tim Oliver is president of Forum of Insurance Lawyers (Foil)