Research says that the public wants the speed and efficiency of a claims company coupled with the integrity of a law firm. If claims companies deliver the right products at a fair and reasonable price, and we have a regulatory body with teeth, we will be very close to having the claims sector the public is calling out for.
Fundamental to this will be a lawyer-owned claims company with the very best IT structure and a commitment to an ethical and open way of doing business. This is what the new Claims Direct will look like when it is launched in the coming few months.
What Claims Direct wants is an ethical claims sector where the customer feels they are getting the best legal service possible, at no cost to themselves, which delivers a settlement quickly.
To achieve this it is has to be regulated.
The Claims Standards Council (CSC) is best placed to regulate the sector, providing it has the backing of the Government and it has the teeth to resolve problems on behalf of the claimant.
The CSC’s guidelines are robust and hard-hitting, but we still need that extra step of government endorsement, which we now seem to be close to receiving.
This approval, if and when it comes, will give the CSC the teeth it needs to be taken seriously by law firms and insurers alike. Especially when you consider that the bite the CSC will offer could also be backed up by the Law Society and the Financial Services Authority (FSA).
Some insurers are already crediting the CSC with helping the claims sector grow into a more mature business.
Axa’s claims director David Williams said in a recent Post Magazine interview: “If the Government eventually steps in, the CSC has to be credited with trying to get a set of rules together. The industry had come a long way from a year ago, as we are at the stage where opposite sides of the spectrum are now agreeing on certain principles.”
My hope is that this will help turn the CSC into the claims sector’s Association of British Travel Agents (Abta), which the public knows and trusts and which can protect the customer.
Of course, holidaymakers can still do business with non-Abta outlets, as they will in the claims sector. But by accessing non-CSC approved claims companies, people will not have the confidence of buying from a recommended company, nor will they have the assurance of the CSC’s intervention when resolving a dispute.
The more widely that the CSC becomes known to the public, the greater the commercial incentive there will be for members to join and to respect its codes of conduct.
In the future, law firms wishing to work with the better-respected claims managers will only be attracted to those with the CSC seal of approval. Similarly, the general public will increasingly be drawn to claims companies with working practices that have been scrutinised and passed by the CSC.
For lawyers, too, recent history has shown that dealing with claims companies can be bad for their financial health.
If the demise of The Accident Group (TAG) has taught us anything, it is that we have to reject the convoluted and overengineered way in which referral fees, commissions and insurance policies are woven into the claims mechanism. We have already seen a call for an end to referral fees.
Whether this is the way forward remains to be seen, but I would suggest that the real key is to ensure that claims managers are paid only for providing a genuinely valuable service to the customer or to their lawyer, which goes beyond the mere ‘referral’ of the case. The fee, as with lawyers’ fees, must be proportionate to the service provided. This is where the claims companies have to adopt the principle of ‘reasonableness’.
In the personal injury (PI) world, we have already come to understand the notion of reasonable costs – and therefore reasonable profits – from a case. Claims companies must now rethink how they earn their money and what services they provide in order to make a living.
There has to be greater transparency of what is included in a referral fee – who has paid it, to whom and for what?
The legal fees payable in a case should include the ‘service’ provided in respect of the referral provided, so long as the referrer has advanced a claim that the insurer or the courts have accepted.
Companies would then be in a position to charge more openly for the marketing, claims capture, vetting and tracking services at which they excel.
Finally, claims companies, law firms and the CSC must get the insurers on board.
Recent proposals by major insurers to cut solicitors out of the low-end PI claim altogether is simply preposterous. They are the law sector’s equivalent of a football team arguing that the opposition has no need of a goalkeeper.
For an insurer to say it has the claimant’s best interests at heart does not stack up when we see claims settled for a pittance, but at great speed, in which the client’s genuine needs are not met by a low compensation offer.
A claimant usually needs a solicitor who has the experience and understanding to explain the current and future ramifications of their injury and to then argue their case in order to obtain the very best settlement – one that is based on expert opinion and that will meet their future needs.
But we have to face facts: some firms charge far more for handling a PI case than they can really justify, and many get away with it. Understandably, this upsets the insurers to the point where they are lobbying to cut lawyers out of the deal entirely.
This is not in the claimant’s interest.
Lawyers have to hold their hands up and admit that the current process in simple cases is overengineered. Then they have to bring insurers back to the table and work very hard to show the public that they can act responsibly, charge reasonably and work swiftly.
This is an approach that any decent claims company will adopt in the future.
And if the CSC oversees claims managers with a rod of iron, the public will no longer have any reasons to mistrust them.
Neil Kinsella is cheif executive of Claims Direct and managing partner of national law firm Russell Jones & Walker