Wednesday, 30 May 2012

The insurers’ lot in life

Since the advent of the 2008 financial crisis, we are reminded on a near daily basis the weaknesses of free-market capitalism. Stories of sky-high pay, greed and commercial practices – which are geared to the benefit of the few and at the expense of the many – habitually occupy the public consciousness.

While the most common focus may be on banking, the personal injury system is just as riddled with the worst excesses of capitalism. No more so is this apparent than in the auctioning of personal injury cases.

Some of you may have read my remarks on this practice in the media this week, to refrain it is the ‘referral fees’ model brought to its logical and most dehumanising conclusion, essentially insurers conduct referral fee auctions amongst solicitors for bundles of cases. The ‘price tag’ of these case bundles is likely to be influenced by the degree of injuries sustained by specific cases, essentially putting people’s misery up for sale to the highest bidder.

I was compelled to speak out on this issue as it has become clear that the referral fee ban contained in the LASPO Act has done nothing to curtail this practice. Insurers, and others, continue to make hay while the sun shines ahead of the ban in April 2013. The Government and public are distracted by talk of ‘whiplash epidemics’ and the need to reign in ‘ambulance-chasing lawyers’. Blame for the ills in the personal industry market is spread far and wide, but little is placed at the door of the insurer. It is my hope that by shedding some light on this practice, the microscope of public scrutiny would focus sharply on the amorality of the insurance industry’s treatment of accident victims.

I don’t believe that the insurance industry is staffed by those lacking in moral conscience. It is not the people within the personal injury system who are found wanting, rather it is the mechanics of the industry itself which are so geared towards commoditisation and profiteering that the human element is all but removed. Like in banking, the rights of the individual and concepts of morality are often lost in a morass of spread-sheets, mathematical formulas and clever business practices all designed to accentuate the bottom line. At the end of the day we are talking about people who have been hurt, sometimes catastrophically. This fundamental misstep is not only a direct threat to access to justice for injured people, it is also a key reason behind the escalation of motor insurance premiums for all.

Make no mistake, I am not advocating reversion to an agrarian economy, nor harking back to some mythical golden-age where insurers were an unbridled force for good. I am simply saying that a conscious needs to be injected into the system – call it conscientious free-market capitalism or whatever you like – where the drive to an ever greater bottom line is tempered by equal thought for the public good. Such a step-change could result in insurers working with, not fighting, solicitors to create a framework where access to justice and the rights of victims of accidents are protected, while the costs in the system are minimised and fair returns are commercially generated.

These aims are of course not mutually exclusive; however the mentality present in the insurance industry, exemplified by these auctions, is not conducive to the construction of a fair and equitable system. I have written repeatedly of the need for personal injury solicitors to recognise the dysfunctions in the system and strive for higher professional standards and the same retrospective and reform needs to be undertaken by the insurance industry. Then and only then will the holistic reform which the personal injury system sorely needs become a reality.