(All guest blogs represent the views of the individual and do not necessarily represent the views of the ABI or its membership.)
The mood is likely to be optimistic at the forthcoming ABI Motor conference on 20 November. Despite a couple of tight votes in the House of Lords, the Civil Liability Bill has emerged relatively unscathed from its parliamentary passage and will receive Royal Assent in the next few weeks. Some minor concessions were made by the Government, but nothing that fundamentally changes the scope of the planned reforms. Insurers will have to report savings from the whiplash reforms to the Financial Conduct Authority sometime in 2024 or 2025.
Focus now shifts onto implementation and the detail of the reforms. There will be various pieces of secondary legislation in the form of regulations sometime over the next few months. It has always been the case that it is these details that will ultimately decide upon the future motor claims landscape and how the reforms actually impact the industry. They have the potential to reshape the market completely and, certainly, irreversibly. There can be no dispute that premium paying customers will be worse off, both financially and in the representation that they receive, but we’ll have to see whether the insurance sector makes the gains that it has long been anticipating and how these translate into premium savings.
Whilst positive reform of the industry is welcome, this particular set of reforms is misguided and counter-productive. What the insurance sector may gain in reduced claimant legal costs and damages, it is likely to lose in having to sort out premium paying customers left baffled and demanding assistance about what to do following an accident.
Virtually no-one I have spoken to for months believes that Litigants in Person will brave the new Portal to pursue their own claim, no matter how user-friendly the final system may eventually be. Instead, everyone acknowledges that the new Portal will simply be a gateway for claims farmers, McKenzie friends and others offering ‘legal advice’ with all the problems around the encouragement of claims and fraudulent behaviour that they bring. The threat of ‘ghost claims’ looms increasingly large over many a discussion. You only have to look at the fact that people did not bring PPI claims themselves to agree they are unlikely to run an RTA case themselves!
With credit hire claims, repair and total loss and rehabilitation falling outside of the new Portal, MedCo and the new FCA regulatory regime, we will likely be knee deep in the dubious world of administration fees, commissions and inflated subrogated recoveries as the costs mount for insurers.
Dealing with CMCs instead of the ‘professional’ law firms will create a whole new set of challenges and costs for the insurance sector to deal with. Pushing out solicitors from the regulated claims process may seem like a fine idea, but the void will be gratefully filled by others less regulated. With the recent news that solicitors will be able to provide services from unregulated businesses, in other words CMCs and others, there will be absolutely no incentive to be a fully regulated, insured, professional provider of legal services in the future.
So, combined with the proposed increase in the small claims limit to £5000 and the much-reduced tariff of damages, we have the perfect storm for anybody wanting to get involved in a potentially lucrative unregulated market with lots of commission for providing ‘legal advice’. So that is what was meant by ‘trusted advisers’, thank you Minister. I am very worried about handing the market over to claims farmers and the like up to £5,000, are you?
Donna Scully will be taking part in the 'Implementing the Civil Liability Bill and the increase in the Small Claims Track Limit: The challenges ahead' plenary panel session at the ABI Motor Conference. Find out more and book your place now.