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.

Time for compromise and understanding

Yesterday I chaired a conference entitled ‘Whiplash: The Evidence’. It was hosted by the Association of Personal Injury Lawyers (APIL), of which I am a Fellow, and took place at the Grange City Hotel, near the Tower of London.

The Tower is well-known for having a bloodthirsty history, but I was surprised to learn that the Grange City Hotel has also hosted amateur boxing events. Perhaps some of the bouts even happened in the same room set aside for APIL yesterday – a strange thought.

But then again, perhaps a sense of conflict lurking in the margins was appropriate, for when it comes to the ongoing debate about whiplash it seems that polarised views have been taken and battle engaged. Or, to use a boxing metaphor, the two sides have not only laced up their gloves but have climbed through the ropes and now find themselves bloodied but still standing in the mid-point of a particularly savage fight.

My hope, after yesterday’s conference, is that the hostilities cease. The two sides – insurers and government on one side, with claimant solicitors and medical experts on the other – need to forge a dialogue and start working together to resolve the problems of a system that has become dysfunctional. Nothing is ever gained by rushing through reform; change needs to be holistic and sensibly considered. It is not too late for this to happen even in an area as controversial as whiplash.

In the hope that compromise between the two combatants can be found I suggested yesterday that solicitors should hold their hands up and acknowledge that there are problems in our profession. That there are problems is, after all, no secret. Some solicitors have forgotten the standards they should adhere to, others think more of their profits than their clients. We need to commit to the Benson principles – about which I have written here before – and agree to robust regulation by a regulator which enforces professional standards and has the tools and inclination to punish those who transgress. A robust regulator will help to stamp out the various other maladies which dog our profession – cold calling, advertising which incites litigation, and conflicts of interest.

If the legal profession is prepared to hold out an olive branch, I hope it will be reciprocated by the insurance industry – and prove to be a prompt for a united approach to reform in this sector. This, of course, would entail the insurance industry accepting that it needs to put its house in order, too. Many practices need to change, not least calling injured parties and convincing them to settle (with no medical assessment and no legal representation), then chalking up the resulting under-settled cases as ‘whiplash’ claims. We then need to ensure that the drive to ‘reform’ is slowed down and properly managed. At present, the bandwagon is pushing for the introduction of insurer-driven changes to the RTA portal and small claims court by April 2013. This is clearly wrong.

Reforms that I would like to see the insurers accept can be succinctly summarised. No personal injury claim should ever be settled without supporting medical evidence – or legal representation. If this were agreed I have a strong suspicion that the ‘whiplash epidemic’ would soon start to abate. Next, we need to upskill our understanding of whiplash as an injury. There needs to be consistency across all cases, informed by the necessary biopsychosocial model. There also needs to be better data sharing. Insurers need to share IFB data with claimant representatives. By sharing this information we can identify patterns of claiming and ensure improved fraud prevention.

Add to this a commitment by insurers to pass on costs to motor policy purchasers via a simple percentage mechanism where claims costs reduction equate to reduced premiums and we will have a system with less fraud, less costs and increased fairness.

Isn’t that worth striving for?

I hope so. Here’s to less by way of pugilism by the opposing sides and more consensus, understanding and compromise.

Whiplash reform: slanted to the insurance industry’s benefit

I was delighted to see that The Lawyer published my blog from last week, in which I criticised the bandwagon to dismiss whiplash. Delighted, yes, but despite some welcome extra publicity I do not feel that it is right to leave this issue alone.

The fact is that the government’s drive to ‘reform’ the way that whiplash claims are dealt with will leave anyone who has suffered a genuine injury feeling guilty if they make a claim, or, worse, unable even to make a claim in the first place. But what is even more worrying is the way in which the statements like that of Jack Straw, writing in The Times last week, are uncritically accepted.

Do a google search of ‘whiplash reforms’ and the newspaper headlines that come up are almost all slanted in favour of insurers, as if to accept, without any analysis, Straw’s statement in his Times piece: “Everyone I’ve met in the whiplash industry knows that they’ve been rumbled; that the game is nearly up.” The Labour MP for Blackburn wrote of his pleasure at “ministers’ determination tackle this issue”, in terms that were as pejorative as they were wrong. Whiplash claims apparently depend on “very flaky medical evidence submitted by practitioners with a vested interest”. It is supposedly “too easy to establish liability in whiplash claims”. All in all, they amount to “scandal” which only Parliament can put right. No surprise, then, that Mr Straw cites a book whose very title shows that it is likely to be biased rather than objective: Whiplash and Other Useful Injuries, by Andrew Malleson.

But talk to informed claimant solicitors, GPs and medico-legal experts who deal regularly with whiplash caused injury and you will find a very different view. For those of us at the coalface – for those of us who deal with the reality of the person whose neck has suffered real trauma in a road accident, through no fault of their own – whiplash is a real and debilitating condition. What surprises me, in newspaper coverage of the issue, is the way that journalists seem to accept that whiplash is inevitably ‘bogus’. Why is this? And do the journalists promoting  this line not understand that in doing so they are championing big business rather than the man in the street?

It is all very well for the likes of Jack Straw and other opponents of whiplash to say that it is driving up the cost of motor insurance premiums. But does anyone really think that insurers will suddenly drop the cost of those premiums if and when the government makes it all but impossible to bring a claim for low velocity whiplash incidents?

An oft-ignored fact gives the lie to this: since the introduction of the road traffic accident portal in 2010, insurance premiums have, according to the insurers analysis, been increasing above the rate of inflation. This is despite some  estimate  £500m in legal costs being  saved by the insurance industry since the establishment of the portal. That being the case, how can we seriously believe that insurers will pass on costs savings to motorists as a consequence of so-called ‘reforms’ to whiplash claims?

Past experience tells us its not guaranteed. The real scandal is not that people make claims for whiplash but that so few people (and certainly, no one in government) are prepared to peel away the layers in this debate and confront the truth: reforms to whiplash are geared to insurers’ benefit.

The whiplash bandwagon is careening out of control

Once again the whiplash bandwagon has rolled into town – and once again plenty of people have hopped aboard. As Transport Secretary Justice Greening and Justice Secretary Kenneth Clarke are expected to announce whiplash claims reforms today, at what is the second summit of motor insurers in Whitehall (the first was held on 14 February, with no less a host than David Cameron), the great, the good and the not-especially-well-informed have sought to make their views on whiplash known.

Speaking before the summit, Justice Minister Jonathan Djanogly told the Radio 4’s Today programme: “I think that people do suffer from neck injuries and that it’s important to have a compensation system that allows valid claims to go through. But I do think, when we hear that there is an average of 2.7 whiplash claims for every accident in this country, that the system is being misused.”

Mr Djanogly went on to articulate the government’s view: that all claims for whiplash should go before independent panels of doctors. “At the moment they are normally referred to the claims managers’ panels of doctors,” he said. “We also think we need to have tougher guidelines over doctors’ diagnosis of whiplash in the first place.”

The AA was quick to wade into the debate. It declared that reform of the injury claim system “cannot come soon enough”. Simon Douglas, director of AA Insurance, said: "I hope that today's Government announcement will see a tight timescale applied to reform of the civil litigation which, at present, encourages people to make a claim regardless of how serious their injury is or even if they have not suffered injury at all."

While Douglas also called for a clamp down on cold-call claims management and personal injury firms (and, into the bargain, noted that the present system was “dysfunctional”) the essential thrust of his comments was to echo the government’s oft-enunciated, always unthinking line about “compensation culture”. Clarke himself happily took up the baton, to declaim that: “It is scandalous that we have a system where it is cheaper for insurers to settle a spurious whiplash claim out of court than defend it, creating rocketing insurance premiums for honest drivers.”

In fact, what is truly scandalous is the absence of any will on behalf of the government to entertain a serious debate about whiplash. The received wisdom is to assume that whiplash is fabricated, that anyone making a claim for compensation is inevitably a fraudster. This is a grave slur on the majority of people who are unfortunate enough to suffer whiplash in a motor accident. It could be scotched if the government were to invite solicitors who represent whiplash victims to attend today’s summit, and others like it, but instead the government seeks only to discuss the matter with those who have a vested interest in annulling, as much as possible, the chance of anyone bringing a claim.

More to the point, there are those on the government’s badly piloted bandwagon who contend that whiplash claims should be barred where the impact occurs below a certain velocity. This again is wrong. Although the person experiencing whiplash in such circumstances – for example, when stationary in traffic and ‘rear-ended’ by another vehicle – may not have overt signs of injury, the possibility of soft tissue damage to the overstretched ligaments of the neck has been well documented. So, too, is there an increasing array of cutting edge medical analysis to the effect that the psychological effect of such an accident may be sufficient to create the symptoms of whiplash.

But from a lawyer’s perspective, there is a fundamental issue of basic negligence law. At law school we learn of the ‘eggshell skull principle’. This means that a person committing a wrong must take his or her victim as they’re found. If, then, a victim is extra vulnerable – perhaps because of a pre-existing medical condition, such as an operation to the cervical spine which sees fusion of miscreant discs – then the wrongdoer has to account for harm that might not ordinarily have been foreseen. 

The government’s endeavours to introduce a velocity threshold would do away with the eggshell skull principle – itself a legal doctrine that has held water for over a century. The idea is emblematic of the wrong-headed approach currently being taken to the issue of whiplash, and it is yet more evident when we stop and remember that the current system already allows for the appointment of independent medical experts to assess the veracity of whiplash claims.

The whiplash bandwagon is in danger of being driven so badly that accident victims have little or no chance of redress. That may be good news for the insurance industry – and the many government ministers who have a financial stake in it – but it’s a poor return for the man in the street.