Market round-up: May 2019
We’re in a bit of a holding pattern at the moment as the personal injury market waits to see if the Civil Liability Act whiplash regime will actually come into force in April 2020.
But for sure, plenty of preparatory work is underway. We learned recently that unrepresented claimants will have paid-for access to an “independent view” of their claim in the new IT portal.
Lord Keen, the Ministry of Justice’s (MoJ) spokesman in the House of Lords, stressed that the “key design principle” was that claimants were at the heart of the process, meaning the portal has to be “as simple and efficient as possible for unrepresented claimants.”
He continued: “We have also initiated work with a group of experienced alternative dispute resolution providers to develop a new bespoke system of alternative dispute resolution to support unrepresented claimants using the new IT portal. The IT system will provide access to a low-cost paper-based system, paid for by the compensator, which will enable unrepresented claimants to seek an independent view from a qualified expert on key elements of their claim.”
Frustratingly, there is no detail on who will provide the view and how much they will be paid. It reminds me of the neutral system that InterResolve has been pushing in the market for many years.
Lord Keen also revealed that PEGA, an American company that produces software for customer engagement and digital process automation, has begun building the portal. He said PEGA has “extensive” government project experience having developed projects for both the US government and Department for Environment, Food and Rural Affairs in the UK.
The MIB, which is overseeing the work for the MoJ, has also engaged Big Four accountants Deloitte to provide “overarching programme assurance” on the delivery of the IT build. I don’t know if that’s reassuring or not.
The MoJ is working with the Civil Procedure Rule Committee to make all the rule changes, and has also issued a consultation on putting MedCo at the heart of the portal. The MedCo model of providing a randomised list of medical report providers will be retained, although it is likely to include fewer choices than represented claimants receive.
The government estimates that around 400,000 claims will be affected by the new small claims regime, and is assuming that around two-thirds will have legal representation, leaving around 150,000 without.
The consultation acknowledges that additional experts may be needed in future as there are injuries that will fall within the small claims track that are not soft-tissue injury claims, such as tinnitus, minor types of fractures, dental and psychological injuries. It asks too whether the current fixed recoverable cost of £180 should be applied to all reports under the new regime, or whether this risks not attracting sufficient experts.
Another consultation, this time from the Treasury, is looking at the details of what insurance companies will have to report to the Financial Conduct Authority (FCA) to prove that they have passed on the savings from the reforms to policyholders. We won’t see this information until 2024 at the earliest (the government is allowing three years post-reform before checking the figures), and the concern from the claimant side is that not enough detail is being demanded. When you consider all the other elements that go into an insurance premium – especially in light of insurer complaints about rising repair costs – surely it is vital that they provide as detailed a breakdown of their payouts as possible.
Indeed, insurers are already touting falling premiums in anticipation of the reforms, although that is probably more to do with the likely change in the discount rate, which is widely expected to rise from the current -0.75% to between 0% and 1% when the MoJ concludes the review mandated by the Act. A decision has to be taken by 5 August.
Away from the reforms, the FCA formally took over the regulation of claims management companies on 1 April, which has unsurprisingly led to another shake-out of the market. As of that date, 973 CMCs had registered for temporary permission to continue operating while they go through the full FCA authorisation process; last summer, there were 1,238, down from a high of 3,213. It’s too early to have seen the FCA bare its teeth, but I bet it won’t be too long until it does.
But perhaps the most significant development of late was the Court of Appeal’s ruling in Herbert v HH Law, which blew a hole in the business model of many PI firms that since LASPO have been charging a standard 100% success fee, capped at 25% of damages. As this is not linked to the individual risk of the case, the court held that the client needed to have given informed consent about being charged in this way. I doubt many firms did this, although you can be sure that they now are.
This was despite the court finding that all the paperwork that HH gave Ms Herbert – the retainer, conditional fee agreement and a ‘What you need to know’ document – provided her with “a clear and comprehensive account of her exposure to the success fee and HH’s fees generally”.
The frustration is that this and other rulings – such as the Court of Appeal decision earlier this year on Bott & Co’s heavily automated flight delay practice – seem to reflect a lack of understanding about how law firms handling high volumes of low-value litigation need to operate nowadays. The system imposed on claimant lawyers does not allow the highly personalised service that everyone would like to see.
Claimant lawyers have long felt that personal injury reform has been a one-way street, and decisions like these do nothing to dispel that impression.
