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Keoghs Blog: A week is a long time in politics

20/10/2016

As Harold Wilson famously said in 1964, a week is a long time in politics.

And how true this still is, more than 50 years on. It’s been exactly one week since The Times reported that the Autumn Statement reforms “have been set aside by the Government". Inevitably, there has been a lot of speculation and conjecture. One week on, what more do we actually know for certain?

Official lines have been few and far between but we are a little less in the dark. Earlier this week the Minister of State, Sir Oliver Heald, confirmed in response to a parliamentary question about the long-awaited consultation that:

“Ministers are considering this issue and the Government will bring forward proposals in the coming months.”

This is encouraging. At least we can be rest assured that these reforms have not completely disappeared. The delay is regrettable but the insurance industry can live with it provided that there is the will within the new Government to move things on in the near future.

So – the wait goes on. It strikes me that this in itself presents both risks and opportunities.

The risk: that the Ministry of Justice rush through this reform in a piecemeal way. There may be some pressure to demonstrate their commitment and follow through on the original announcements made in the Autumn Statement last year. And whilst the insurance industry would welcome solid Government commitment, unintended consequences must be considered carefully to avoid potential pitfalls and the past mistakes of incomplete reform. This is particularly important given what we know of the claims market - we are all aware of how adaptive CMCs are, for example, and despite the move to strengthened regulation at the FCA, we must bear in mind that the PPI claims deadline of spring 2018 is only 18 months away. If there is piecemeal reform – particularly if the SCT is increased in isolation without appropriate claimant safeguards – CMCs will move into the PI space in droves. The losers in this equation will be those that the Government will want to protect - injured people and premium paying consumers.

And what of the opportunities? Much has recently been made of the need for the opposing sides of the claims industry to collaborate. There are some aspects of potential reform that we've heard both sides might agree on; there are murmurings that the claimant fraternity can see the value of reducing the limitation period to 12 months, for example. And, for some time now, there has been recognition from insurers and claimants that more efforts need to be channelled into further tackling fraud and controlling unscrupulous CMC behaviour.

This is all very encouraging, but let’s be realistic here – there will be some issues on which both sides will never agree. This is where we need the Government to step in and make decisions. Constructive dialogue and collaborative working can get us some way. But the role of Government is to intervene where the industry or the market cannot effect meaningful change on its own. In my view, this has never been more necessary or relevant.

 

Samantha Ramen
Author

Samantha Ramen
Partner
Director of Market Affairs

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