What does the future claims landscape look like?
Personal Injury aware
With Brexit paralysis continuing as we write, this year has certainly been one of frustration for many, and it looks as if this is going to continue for the foreseeable future.
On the plus side, we have a Lord Chancellor who has survived a full twelve months in the post and that might have been a considerable contributing factor as to why the Civil Liability Bill finally received Royal Assent at the end of last year. So what does this mean in terms of reform?
The Discount Rate
The Lord Chancellor now has 90 days to commence the review and a further 140 to complete the review. Although the panel of experts will no longer be involved in the initial determination, the Lord Chancellor must consult the Treasury and the Government Actuary.
Consequently we know that the process now must start by 20 March and must be completed by 7 August but we anticipate that this might well happen sooner as the current rate is iniquitous and is also costing the public purse a great deal of money. Accordingly, we would not be surprised to see a rate change by May or June.
As promised, the Government also published a call for evidence on 6 December asking for details on, amongst other things, investments available to Claimants, investment advice provided to claimants and investments actually made by claimants. This consultation closed on the 30 January.
The Civil Liability Act introduces tariff damages, a ban on pre-medical offers and provides a legislative definition of whiplash. This will be backed up by CPR additions and amendments and secondary legislation increasing the small claims track limit to £5,000 for RTA and £2,000 for EL/PL.
There will be a new portal for all claims with a value of less than £5,000 which will be designed to be used by litigants in person but will also allow access to representatives of claimants.
Whilst there is still much to be done and a great deal to be clarified, the Government insists the reforms can and will be implemented by April 2020 although the possibility of slippage to October 2020 cannot be ruled out.
Extension of Fixed Recoverable Costs
Last year we were optimistic that the Government’s proposals to extend FRCs in personal injury claims up to £ 100,000 in value, would be advanced in 2018 and implemented in 2019. Unfortunately there is little doubt that Brexit has slowed things up in this regard to the extent that the MOJ did not publish a consultation in 2018. We remain optimistic that this will happen but, taking into account the current political situation, and the delay thus far in getting the publication out, it is unlikely now to be implemented before the middle of 2020 at the earliest.
Other Legislative Reform
The Financial Guidance and Claims Act received Royal Assent on the 10th May 2018 and the FCA has hit the ground running by indicating it will investigate how existing insurance customers are treated and in particular that there will be an assessment of claims inflation in general insurance with specific reference to how far brokers and motor insurers are inflating claims through referrals to CMCs and keeping volume discounts from their own repairers.The indication is that this investigation will commence around spring/summer time.
The Automated and Electric Vehicles Act received Royal Assent on 19th July 2019. The Government wants to keep the momentum up and the Law Commission published a consultation (which closed on 8th February) dealing with how safety can be assured before automated vehicles are placed on the market, as well as ongoing monitoring and maintenance requirements once they are on the road; civil and criminal liability and the need to adapt road rules for artificial intelligence. This will be followed by consultations on the regulation of automated vehicles in public transport, with final recommendations to be delivered by March 2021.
Given the Brexit paralysis which has infected the political environment in 2018, the Government has done well in delivering important domestic legislation in key areas of reform affecting the insurance industry. However, there is still some way to go before these key areas of reform are implemented and, most importantly, start to deliver costs reductions which can be passed on to consumers.
There remains much to do in many areas and Keoghs will continue to lobby on all these issues and keep you appraised of developments.
On the back of the Civil Liability Act one could see a scenario where the credit hire aspect of the non-fault supply chain grows in stature. As a head of claim that still attracts referral revenue (and more so with credit repair), insurers, brokers and bodyshops alike will be keen to ensure that this revenue is protected by quick referral to the supply chain.
We are already seeing the claimant supply chain recognising and offering a one stop shop or enhancing this capability by ensuring credit hire and injury capability under one roof is delivered. The purchase of Kindertons by Examworks last year highlights this.
Consequently, insurers will have to consider their target operating models to deal with the fact various heads of claim could increasingly come from one entity - do they need third party claim centres to replicate this?
In the initial phase of the Litigants In Person (LIP) portal it seems to be the case that credit hire will not be dealt with. As such, credit hire will continue to be handled through the processes we see today, primarily the ABI GTA and protocol agreements agreed between insurers and CHOs.
Credit hire within the LIP portal will invariably be the cause of great debate. Whilst an individual may be able to understand and submit a claim for a tariff damage injury case; the intricacies of such a claim with another area such as credit hire opens the debate still further.