As we all know the Mesothelioma Bill was recently debated in the House of Lords and will soon be considered in the Commons. Lords had strong views on the Bill and there was impassioned debate in the Chamber. I’m sure many in this room have similarly strong views. But before I come to talk about the Bill itself, I thought it would be useful to provide the insurance perspective on the wider environment in which the Bill exists.
The UK’s asbestos legacy
I don’t think I need to rehearse for this audience the legacy that the historic use of asbestos has left us with today. Suffice it to say that too many people have died – and will continue to die – as a result of their expose to asbestos.
It is worth remembering that insurers didn’t expose anyone to asbestos. The firms they provided insurance to negligently exposed their workers. Insurers continue to face claims resulting from Britain’s industrial legacy and, as a result, the litigation environment for asbestos remains a dynamic one, although mainly confined to disputes between compensators.
I have said it before and I will say it again today: we are an industry that has a significant amount of work to do in terms of improving the trust consumers have in us. We have paid a heavy reputational price for some of our own practices. Insurance is an industry where trust and integrity are critical to consumer confidence. And insurers have some important lessons to learn from the way they have handled the UK’s asbestos legacy. But context is important as well. Many exposures occurred decades ago, there was no reason or requirement for an insurer to retain policy records and many companies – both those that exposed their employees to asbestos as well as insurers – have gone out of business.
Part of our challenge at the ABI is to work to restore consumer confidence and to lead on work that will make the claims environment more efficient and more effective. Today we have an environment where untraced mesothelioma claimants get insufficient support, too many asbestos-related cases reach the courts and the compensation system is cumbersome and costly. So it is positive that the Government shares our vision to improve things for those with asbestos-related diseases.
Employers’ Liability Tracing Office (ELTO)
Insurers have already invested significant time and resources into improving consumer outcomes. The Employers’ Liability Tracing Office, or ELTO, was voluntarily set up to act as a repository of employers’ liability policies. Since going live in 2010, there are now over 9 million policy records on the database, the number of searches undertaken continues to increase – last year there were 64,000 - and successful tracing rates continue to improve and now stand at 76%.
But ELTO is not without its challenges.
Firstly, as an industry we want to increase the population of the Employer Reference Number (ERN) on the database as we believe it is the best unique identifier of the correct employer. This should help future claimants to trace their employer’s insurer. Capture rates are around 30%. Although the Financial Conduct Authority has extended the deadline for insurers to obtain ERNs to April 2014, that date is fast approaching.
Despite discussing this issue with officials across Whitehall, the bureaucratic buck-passing continues. Without Government ownership of the issue, in April next year insurers will be in an invidious position. Either sell EL insurance without the customer having provided an ERN and breach our regulator’s rules. Or don’t sell the insurance (which is a compulsory product for most firms) with the implications that will have for firms, especially small and medium enterprises.
The second challenge ELTO has is the absence of claimant stakeholder involvement. Since ELTO’s inception we have wanted to involve claimant lawyers, unions and asbestos victims’ groups to ensure that it meets their needs. So it remains profoundly disappointing that the offer has not been taken up. My view remains very clear. If you want to help steer the ship, then you need to be on board. As an industry we will continue our work to improve ELTO. You will need to decide whether you want to embark on that journey with us. But the offer to participate remains on the table.
Turning now to consider the specific issues around mesothelioma.
We all know that mesothelioma is a horrific disease which results in seriously impaired life expectancy post-diagnosis. It is different from other asbestos-related conditions. Mesothelioma is unique and as such, it requires unique solutions.
Both insurers and Lord Freud recognised this and wanted to do something about it. At this point I would like to publicly pay credit to Lord Freud for the extensive efforts he and his team at the DWP have made to improve the status quo for claimants.
We held a number of meetings with Lord Freud to negotiate a package of reforms. Ultimately we agreed an indivisible package of measures to improve support for untraced occupational mesothelioma claimants.
There has been some criticism at the number of meetings insurers had with the Minister. I make no apology for that. This was a negotiation between the Government and the industry about a complex and difficult issue. Although others may have an interest in the outcome, that doesn’t entitle them to a seat at the negotiating table. And I know the Minister and his officials held a number of meetings with, and sought the views of, claimants and their representatives throughout the process.
I recognise that some think the Government could have pushed the industry further to get a better deal for claimants – whether that’s in relation to the date of eligibility, the link to a claimant’s employment or the tariff level. But the package of measures needed to strike a balance which met the needs of claimants and defendants but also ensured that the costs would not fall on today’s businesses.
I’m not proposing to go through the criticisms of the package of measures now. Ultimately, it now represents Government policy so I’m probably not the best person to address those concerns - although I’m happy to answer any questions about the perspective of the insurance industry in the panel discussion that follows.
Suffice it to say that in an EL market that does not currently make a profit, a levy of £30-35 million per year is not an insubstantial cost. We expect the scheme to run for the next 40 years which will cost the industry around £300 million over the next decade alone. If the costs of the scheme increase, EL premiums may need to go up. And that is not good for struggling SMEs who will be the backbone of the UK’s economic recovery.
And let’s be really clear. Given that the scheme has been specifically designed as one of last resort, the ideal situation would be that no one uses it at all as everyone should be able to trace their employers’ insurer. But we don’t live in an ideal world. And that means we need to put a scheme in place, which is what we are working to do.
Improving the civil litigation framework
I’ve talked very deliberately about the “indivisible” package of measures we agreed with Government. Although the support scheme has attracted the headlines and is what is reflected in the Mesothelioma Bill, the Government also needs to improve the civil litigation framework for those making claims resulting from asbestos exposure.
The Ministry of Justice is currently consulting on a number of measures with this goal in mind. We see these reforms as absolutely critical to improving the current framework for claimants with asbestos-related conditions.
The efforts of Master Whittaker have greatly improved things for those cases that end up at the Royal Court. But there are still too many cases that end up in litigation which serves nobody’s interests. We would like to see a dedicated mesothelioma pre-action protocol ensuring that all necessary information is provided within set timescales to get claims resolved quickly. It currently takes too long for insurers to get the information they need to process a claim and a streamlined process with set timeframes will help address this.
We think claimants would benefit from a secure electronic claims gateway to provide a central point of information for sufferers on how to pursue a claim as well as a secure and speedy process for doing so.
We want to see fixed legal fees for solicitors so that the right incentives are in place on all parties to get claims resolved quickly. The higher value of a claim doesn’t necessarily mean a solicitor needs to do any more work. And it’s worth remembering that the interests of the claimant’s lawyer are not necessarily the same as the interests of the claimant themselves. And it is the latter whose interests should come first.
The Ministry’s consultation closes on 2 October and we are working hard to develop an evidence-based response. I would encourage you to do the same. Getting support for the untraced scheme in the Mesothelioma Bill is one thing. But making the court system quicker and more efficient for all those making asbestos-related claims is a prize we should all be fighting for.
So in conclusion, things in the claims environment are evolving and that should benefit many mesothelioma sufferers. But there is much more to do and everyone needs to play their part.
In the words, of a partner of a mesothelioma sufferer quoted in a recent report from the British Lung Foundation, “I almost gave up as it had taken so much time and my husband had already died. I just wanted an end to the process”. For me, this sums up why we need to work to make things better for all those who tragically need to make a claim.