Phil Bird: Will the government play it fair?

There is a groundswell of opinion that reform of the UK’s civil justice system is long overdue.

Change is now in prospect, with a consultation process this autumn covering elements of Lord Justice Jackson’s review, which itself is an attempt to find ways to drive excessive transactional cost out of the legal compensation process.

But we should not expect rapid progress, and there will inevitably be debate and disagreement on many points. How could it be otherwise, given the number and range of interested parties? Driving out costs means depriving someone in the food chain of their daily bread, and that is bound to spark opposition.

As the consultation moves forward, it is important to remember guiding principles: any changes should protect and enhance access to the justice system for those in need; and costs should be squeezed out for the benefit of consumers, who suffer expensive insurance premiums as a result of the way the system operates at present.

One stumbling block to consider before debating the merits of the proposed changes themselves is that any alteration to conditional fee arrangements (CFAs), for example, would require primary legislation. That immediately begs the question of whether the review and its conclusions will remain sufficiently high on the government’s agenda – parliamentary time is at a premium for a new administration itching to introduce change in so many areas. But it can be argued that one of the main beneficiaries of reform would be the public sector, which often finds itself as defendant in compensation cases.

Another issue is the fact that the consultation will only focus on certain aspects of the Jackson Review, such as CFAs, leaving contentious matters like referral fees to be dealt with elsewhere. This could be a real concern if it means that not all elements of the the review proceed together. It is important that legislators should look at the Jackson Review as an interlocking package of proposals.

So what will be the main points of contention? Certainly, any move to abolish or limit referral fees would be controversial. Many brokers’ – and direct insurers’ – business models are predicated on the receipt of referral fees from solicitors when clients are looking to obtain compensation following an accident. Equally, many solicitors rely heavily on the use of these fees to obtain clients, and would have no effective marketing strategy without them.

Insurers welcome the review of CFAs and the possible end to the recoverability of success fees and ‘after the event’ premiums. We are glad to see the pilot scheme for assessing disputed costs and the consideration of fast-track fixed recoverable costs. These are key parts of the effort to reduce the cost ultimately borne by policyholders.

But while the initial focus must be on personal injury, because that is the source of the highest volume of claims, there is also a need to consider non-personal injury claims at some point.

Another key point for insurers concerns ‘before the event’ cover. We would have liked the consultation to consider the merits of encouraging the take-up of legal expenses protection, or even making it compulsory. Such a measure would have helped take cost out of the equation.

It is important to repeat that advocates of reform do not want to make access to justice more difficult. That has never been Jackson’s aim – the review simply targets transactional cost. There will still be funding methods available for genuine claimants, possibly through contingency fees.

The goal is a system that does not inflate premiums through the payment of unwarranted and disproportionate costs, but which still delivers fair compensation to deserving claimants. Who can argue with that? IT

Phil Bird is claims director at Groupama Insurances.