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AJAG : robust rebuttal to ABI’s case

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The Access to Justice Action Group, AJAG, has published a robust rebuttal of the Association of British insurers’ (ABI) arguments in favour of the LASPO Bill.

AJAG Co-ordinator Andrew Dismore said:

“The ABI is in overdrive in its well-financed campaign to blame the public, lawyers and the government for rises in insurance premiums: everyone but themselves. But there is another side to the story they do not tell. The insurers want to be their own judge and jury. The present system protects claimants and ensures they receive what the law says they are entitled to, not what the insurance company says it is prepared to pay.

 “The government’s proposals promoted by the ABI will affect access to justice for up to 600,000 people a year. The government acknowledges, in terms, that the winners will be the insurance companies (and their shareholders) and the losers will be claimants. The number of genuine claims will fall by 25%.

 “The no win, no fee system that the ABI and Government want to abolish helps not just road accident victims. It is the main, and often only, recourse available to victims of breaches of privacy like phone hacking, those who have suffered from professional negligence, victims of asbestos poisoning, the families of those killed at work, consumers, small businesses, those seeking to recover debts, victims of medical malpractice, victims of environmental damage including from the developing world, people seeking judicial review of unfair official decisions, whistleblowers, and those acting in the public interest such as  exposing scandals like MPs expenses. In their determination to cut the rights of road accident victims, the ABI would deny all these others their rights too.

 “There is no compensation culture. The reality is that 23% of road accident victims do not bother to claim and only 52% claim for an accident at work, even when they each know another person is to blame. The biggest barriers claimants identify are fears of legal costs and inadequate compensation levels, set to be made worse by the Bill.

 “While the ABI routinely allege fraud, the proven number of cases is comparatively small. The Experian Fraud Index confirmed the real figures: only 12 in every 10,000 applications and claims; and there is the other side of the coin, when insurers allege spurious or fraudulent defences to deny claimants rightful compensation.

 “If the lawyers and ATE providers, whose margins are tight, are branded fat cats, then the liability insurers are clinically obese!  A mere 20 liability insurers have cornered 94.6% of the motor liability market. Admiral, almost exclusively motor, recorded a pre-tax profit of £266m for 2010, up 23% on 2009 (£216m.) and a further increase of 29% after tax in the first half of this year, as their turnover surged 53% to £1.1billion – yet they still increased premiums by 11%. Huge amounts in free shares were paid as staff bonuses.

 “Although they complain about the impact of claims, the liability insurers have not indicated by how much they would reduce premiums, or even that premiums would be reduced at all, if the changes they demand are implemented. Indeed, there is evidence that premiums may actually increase. Insurance premiums have never gone down after a reform or major court victory in the insurance industry’s favour.

 “The ABI says that a claimant doesn’t need a lawyer, as their offers are fair and should be accepted, cutting costs. But 33% of claims need court proceedings to get a satisfactory offer. In 47% of cases, the insurers’ offer was inadequate; and 2% needed a full court judgment to get a fair sum. The Personal Injury Bar Association (PIBA) found that in 99% of 1349 cases where offers were made on the basis of the insurers’ computer model, the claimant beat the offer.

 “Cases only go to court when the insurers deny liability or refuse to pay adequate compensation. The insurers have only themselves to blame for legal costs: if they accept liability and make early reasonable offers, then the costs are contained. As three senior costs judges wrote in response to the consultation: ‘the fault lies with defendants such as these and not with the recoverability regime as a whole.’

 “Success fees, which the ABI wants abolished, provide the swings and roundabouts in the system, averaging costs across the caseload, which enables meritorious but problematical or difficult cases to be investigated and pursued. This includes important test cases on appeal, as often as not defending insurers’ picked appeals on major points of law (where the claimant has little choice but to defend).

 “On the one hand, the ABI says claims management companies (CMCs) are not needed because the public know where to go when they have a claim, yet on the other, they blame CMCs for the increase in the number of claims.

 “While the ABI wants referral fees banned, they do not speak of the insurance industry’s dirty secret: they make huge profits from referral fees themselves. Ancillary income including referral fees made up 54% of Admiral’s first half year UK motor profit before tax.  Admiral Insurance Chief Operating Officer David Stevens said ‘banning referral fees is not a fundamental reform – it will not have that material an impact on car insurance premiums.’

 “The Legal Services Board recently found that the levels of referral fees were linked to the services provided by introducers; there was no evidence that increases in referral fees had led to an increase in the price of legal services; and referral fees had aided access to justice. The ABI want to stop lawyers advertising through CMCs, but again this smacks of double standards: in 2009, just one of the UK’s largest insurers spent £182m on advertising alone (mainly television).  The answer to referral fees lies in better enforcement of the existing rules, especially on cold calling and data protection including tougher regulation of the insurers themselves.

“The ABI argues the cost to the taxpayer – but they have overlooked the losses to the taxpayer. AJAG has calculated that the net cost to the NHS even after allowing for any anticipated savings, will be almost £100m.

“As the Government acknowledge, the changes mean millions more for the liability insurers’ shareholders at the expense of individual claimants. There is a better way of controlling costs without losing wholesale access to justice. AJAG has produced a comprehensive package of proposals, set out in our main brief, which achieves this key policy objective.”

Source : AJAG Press Release