22 | Post Magazine | 6 June 2013 in association with Roundtable Legal Reforms Jackson reforms: First impressions Implemented as part of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, how have the Jackson reforms affected the industry so far – and what will their impact be in the future? By Mairi MacDonald The highly anticipated civil justice reforms The general consensus around the table towards have the potential to overhaul the way claims the recent reforms – including a ban on referral are managed by the legal and insurance fees and the recovery of after-the-event insurance industries. Seven weeks after the introduction premiums from defendants, as well as the of the Legal Aid, Sentencing and Punishment introduction of damage-based agreements and of Offenders Act 2012 – the primary legislation qualiﬁed one-way cost shifting under the Civil encompassing key proposals from Lord Justice Procedure Rules – was one of cautious optimism. Jackson’s review of civil litigation costs – Post, However, participants said much depends on how in association with Hill Dickinson, brought fully the changes are enforced over time and together specialists from the corporate, how successfully they are complemented by the insurance and legal sectors to discuss whether, reforms still to be implemented. These include in these early days, the reforms are working the extension of the personal injury claims strategy director at RSA, said: “Obviously as they were intended. In a far-reaching portal to encompass higher-value motor claims the focus on speeding-up claims settlement roundtable debate, the group considered and employers’ and public liability, extension of and providing access to justice to claimants what will determine, and how to quantify, the small claims limit to £5000 and the Ministry at a more proportionate cost is good for the the reforms’ success, the approach of the of Justice’s whiplash consultation. premium-paying consumer.” judiciary, the unintended consequences and any Considering the beneﬁts to stakeholders, But she expressed concern around a “loss in outstanding issues. Carolyn Mackenzie, complex claims and momentum” in the progress in outstanding areas, Doug Askin, Angela Doran, Paul Edwards, Nathan Fuller, UK Ruth Lawrence, Carolyn Mackenzie, David Powe technical claims insurable risk head of costs, Hill casualty claims partner and head complex claims and underwriting manager, AIG department claims Dickinson service delivery of insurance, Hill strategy director, RSA manager, Llo manager, Tesco manager, QBE Dickinson Market Asso Post Magazine | 6 June 2013 | 23 How will the recent civil justice reforms impact the insurance industry? www.postonline.co.uk/tag/jackson-review Reducing the number of claims rather than Iain Winﬁeld simply cutting cost would have the greatest impact to the industry, agreed Ruth Lawrence, partner and head of insurance at Hill Dickinson. However, she added: “Achieving this would be really hard, because there is such a culture within the country, and such an industry behind those claims.” Lawrence suggested the reforms should shift the focus from costs to damages, noting: “We’ve all had cases where you pay a relatively small amount in damages and a lot in costs, and one would hope [the reforms] should bring back proportionality.” John Windsor, Marks & Spencer head of insurance, emphasised the need to protect claimants’ access to justice, noting he hopes the reforms will reduce “some of the more ridiculous claims all of us see from time to time” rather than the genuine ones. Proportionality problem But considering how the test of proportionality regarding claims costs will work in practice, Paul Edwards suggested the answer is far from clear. “We will have to wait and see because judges haven’t been given much training on it,” he said. “I believe full-time judges have only had about four-and-a-half hours’ worth of training on the reforms, and no deﬁnition of proportionality is being provided. So we’ll see quite varied results depending on the mood of each judge.” He added: “The court can’t do anything about costs that have already been incurred, although it can comment if it thinks they’re too high. which was echoed by Doug Askin, AIG technical a reduction of 5% to 10% in motor premiums But the court is supposed to take ‘push out’ claims manager, who added that “on paper” the over the last 12 months to anticipation in the into account when making projections. Judges reforms will drive certain beneﬁts for insurers, market of “savings in the pipeline”, he suggested are supposed to challenge parties’ decisions to government and insurers but there is “still lots policymakers might be disappointed the reforms ask for 10 witnesses if it’s more proportionate to do to reduce the cost of civil litigation”. have not had a “massive effect on premiums”. to have three.” While David Powell, Lloyd’s Market He asserted the underlying reason for this is Edwards conceded the reforms have the Association underwriting manager, attributed that there are still too many claims and motor potential to end “justice at any cost”. “The days insurance remains unproﬁtable. are gone when you could throw the kitchen sink at a case, win and expect to recover your costs,” he said. He questioned whether more cases will be fought now that the “maximum extent of the liability is clear” and if the reforms The reforms will empower clients who would previously have settled out of fear of the costs, regardless of the hopefully bring a lot merits of the case. Angela Doran, insurable risk department ll, Frances Stapleford, John Windsor, more common sense claims manager at Tesco, raised the potential g assistant head of insurance, oyds vice-president of Marks & Spencer and put the focus back for satellite litigation and urged insurers not to forget genuinely injured claimants. She added: ciation claims, Generali on the claimant “The system will be good for claimants who will get their money earlier because claimant 24 24 | Post Magazine | 6 June 2013 in association with Roundtable Legal Reforms the desired effect in the motor sector by reducing claims life cycles and premiums “by a smidge”, Powell added: “As we extend the value bracket Edwards pondered whether this would lead to 23 solicitors now have a unit cost per case.” for motor and move into casualty, we will see more consolidation in the claimant legal sector, Doran noted there will be a “sweet spot” in the more effort to get reasonably simple cases out asking: “Are we going to see some ﬁrms saying ﬁxed-cost regime on cases under £25 000 for of the portal and that’s obviously a big deal. they can make this work on a scale basis and solicitors to maximise their unit proﬁt cost. “Now that costs have been significantly actually expand?” According to Askin, ﬁrms that She added claimants should get their damages slashed, claimant lawyers have a direct ﬁnancial do not take any of the claimants’ damages and quicker given their legal representatives “no incentive to get their cases out of the portal “just work the models to maximise the proﬁt longer have the Dickensian way of charging on wherever possible.” under the ﬁxed fee” are already emerging. an hourly rate when they have complex case- Doran suggested there is still a role for the “As long as lawyers have the right model, management systems that make an enhanced ATE market to play in protecting against QOCS/ they can maximise the £500 now in motor and proﬁt ratio because of automation”. Part 36. “For lower-value claims, by the time the there’s no need to take the client’s damages,” claimant has to pay 25% of their damages and he said. “It’s a good way of incentivising Claimant focus then ATE, they might decide they would prefer claimants to come to them on the back end Agreeing with Doran, Windsor added: “The to go direct to the insurers, or clients if they of the referral fee ban. Based on that, we will reforms will hopefully bring a lot more have large deductibles,” she said. “This could see a lot of consolidation among claimant law common sense and put the focus back on the result in more unrepresented claims arising in ﬁrms in the next 12 months. Smaller practices claimant rather than on the games we play on the lower-value band, as claimants don’t want will potentially struggle as they may need to costs and trying to score points with different to give away their damages to lawyers.” reach into claimants’ damages to help top-up teams of lawyers. There’s going to be a lot of some costs.” Powell added that creating market fun and games in the ﬁrst couple of years until forces for legal fees was “exactly the intention it settles down.” of the reforms”. Frances Stapleford, Generali assistant Mentioning that claimant law ﬁrms are vice-president for claims, agreed speed of Now that costs offering cash up front or iPads as an incentive settlement is a critical beneﬁt for claimants, while Windsor said claimants will be “more have been signiﬁcantly to potential customers, Mackenzie said: “An unintended consequence of the reforms is that involved” in their claim. slashed, claimant the relationship between claimant and lawyer Askin complained that, historically, claimants has to be very carefully managed when it comes have been too removed from the decision-making lawyers have a direct to funding. I’m hearing that market forces are process, adding: “With QOCS and the funding at play and claimants are approaching different arrangements, Jackson has made it important ﬁnancial incentive to law ﬁrms and asking if they make deductions for the claimant to be involved. So, by default, you should see quicker life cycles and better get their cases out of the from damages. For that to be happening so soon into the reforms is incredible.” trends and behaviours emerging.” portal wherever possible Askin agreed that for claimant lawyers to start Emphasising that the claims portal is having taking a percentage of damages from claimants Post Magazine | 6 June 2013 | 25 Follow us on Facebook facebook.com/post1840 Follow us on Twitter twitter.com/insurance_post that have lived through the post-Woolf world of no-win, no-fee “is potentially quite a hard sell”. Returning to where the responsibility lies for driving the reforms’ success, Doran agreed There is a danger motor claims in the portal never materialised, it “sits in the hands of the judiciary and how it interprets the rules”. Lawrence added: “Certainly that everyone gets “the onus has been on those working within the portal to track that data themselves”, he said. “At in the ﬁrst decisions we’re seeing the judges are excited about the some point in the next couple of years it is going being quite harsh.” However, she cautioned that to have to ask for our experience and our stats.” while judges may be taking a hard line initially, feedback from the ﬁrst On whether ﬁrms will have to defend more there is a danger that might dwindle over time. claims as a result of the reforms, Fuller said: Edwards offered a handful of examples of cases few months. But it may “There is a school of thought that suggests you that have been struck out, including one where the trial bundle was ﬁled a day late and another take two or three years can run more cases because of the certainty around costs but, likewise, because of QOCS, where the claimant side had not complied with before the larger cases claimants might also have the appetite to go a few minor technicalities and was refused an down that route. If we go to trial and lose, there’s adjournment and charged costs. He compared come to conclusion no recovery of our costs, which could potentially the scenario to the “Singapore experience” in be expensive depending on what arrangements which he explained thousands of cases were insurers have with their lawyers.” struck out for the “tiniest of default” for about “Is it sufﬁcient to wait ﬁve to 10 years to see As the discussion drew to a close, Edwards 12 months. “But the courts softened once both whether it works and then try something else, suggested stakeholders remember “claims that sides learned to comply with the rules,” he added. or should the government take a more proactive settle under the new regime for the ﬁrst year “It will be interesting to see if that happens here approach in managing the reform?” he asked. are, by deﬁnition, the straightforward ones”. or whether the judges will continue to enjoy Turning to some of the potential pitfalls of With this in mind, he added: “There is a danger their new power. This is almost the last roll of the process, Doran said she has advised corporate that everyone gets excited about the feedback the dice from the government. If these reforms colleagues to ask insurers for “a monthly report from the ﬁrst few months. But it may take two don’t work over ﬁve to 10 years, we may well of what claims have fallen out of the portal and or three years before the larger cases come to ﬁnd a sort of US model, where costs don’t exist why”, adding: “If insurers have failed to meet conclusion, before we actually ﬁnd the appeal as we know it, it is just imposed on us.” deadlines in terms of payments and admissions, courts getting involved and analysing the way and it affects the overall claims experience, cases are being dealt with.” Measuring success they might ﬁnd themselves in an errors and With the early implementation of the reforms Nathan Fuller, QBE UK casualty claims omissions position.” being positively received by these stakeholders, service delivery manager, questioned how the Edwards agreed management information and the discussions will undoubtedly continue as the government will measure and monitor whether control of monitoring is crucial for the reforms to industry gauges the longer-term effectiveness the reforms are having the intended impact. succeed. As the MoJ’s pledge to provide MI from of the reforms. n Defending your claims spend Our expertise and strength in the marketplace ensure we drive down the lifecycle and cost of claims. delivering insight, ensuring value Please contact Ruth Lawrence on 020 7283 9033 or email@example.com. For further information, visit hilldickinson.com.
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