annual insurance event 2014 - 3 december 2014
TRANSCRIPT
Annual Insurance Event 2014
Lloyds of London
Wednesday 3rd December 2014
Introduction
“You can’t connect the dots looking forward; you can
only connect them looking backwards”
Steve Jobs
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Personal Injury
• “A lot of people are exploiting the opportunity to earn
a few pounds by exaggerated or non-existent claims.”
Ian Crowder, AA
• 475,000 whiplash claims a year (The Association of
British Insurers)
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1. Read the question, make your
choice, then press key “1”, “2”,
“3”
2. If you change your mind, press the
C Key then re-enter your answer
3. Press “OK” to validate your answer
What trends do you perceive in
relation to injury claims? 58
1 - They're a problem and we're
getting more of them
2 - They're a problem, but the
numbers are the same
3 - They used to be a problem,
but things are improving
4 - The 'compensation culture'
is a myth
5 - Too early to say
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What trends do you perceive in
relation to injury claims? 1 - They're a problem and we're
getting more of them
2 - They're a problem, but the
numbers are the same
3 - They used to be a problem,
but things are improving
4 - The 'compensation culture'
is a myth
5 - Too early to say
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38%
31%
9%
2%
21%
Personal Injury
• “Whiplash capital of Europe”
• “Aviva calls for whiplash 'easy money' to end”
• “Deafness claims increase almost five-fold over
four years” (Insurance Times, 26 Nov)
• Claims in the claims portal in August and
September were up 15% and 20% respectively
on a year on year basis
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MedCo
• “a new independent IT hub” (MOJ)
• “ABI deems MedCo software critical in whiplash fraud
fight” (Post)
• “The exclusion of LIPs… suggests that the real purpose
of these proposals are to increase the control of
insurers over the process” (Thompsons)
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Further reform?
• “We are making sure we do our bit to help drivers with
the cost of running a car… Insurance premiums have
fallen by record amounts over the past year”
• “They’re not going to get other things until they prove
this change brings down insurance premiums” Chris
Grayling
• “Car insurance costs back on the rise as comparison
sites face operational overhaul”
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Fraudulent claims
• “We are continuing to go after the fraudsters who
force up costs for honest drivers.” Chris Grayling
• Court Response:
– Fish v Hillman – ‘fundamentally dishonest’
– Kerley v Coe- C paid Admiral’s costs of £6000.
• IFED: 300 + cases investigated per annum, compared
with 114 three years ago. 98 convictions in total.
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Fraudulent claims
• “We’ve made a lot of headway on whiplash but other
organised fraudsters are emerging… other reforms in
the PI space should be encouraged in occupational
disease.’ Ben Fletcher, Head of IFB
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Court control of cases
• “Costs budgeting not working, say 45% of solicitors”
(Gazette)…
• … “Only 45% against? Presumably the rest were either
abstentions or defendant solicitors” (Anon)
• NHSLA “accused some firms of front-loading costs and
thus avoiding costs management” (Litigation Futures)
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Are courts managing costs? 55
1 - Yes - and there will be
significant savings as a result
2 - Yes - but savings will be minimal
3 - No - the system does not work
4 - No - because of lack of
understanding or knowledge by
judges and litigants
5 - No - because legal advisors
play the system
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Are courts managing costs?
1 - Yes - and there will be
significant savings as a result
2 - Yes - but savings will be minimal
3 - No - the system does not work
4 - No - because of lack of
understanding or knowledge by
judges and litigants
5 - No - because legal advisors
play the system
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16%
18%
9%
45%
11%
Claimant practices • APIL Survey of firms:
– 94% no longer taking £1,000 - £10,000 motor claims
– 98% no longer taking EL disease cases
• “Bigger economies of scale in Claimant PI will be good
for client service” (David Johnson FOIL)
• We now have a large industry focused on PI claims and
that is not going to go away – you can’t put the genie
back into the bottle.” (David Butcher, LV)
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Claimant practices • “Reduced fixed costs in motor personal injury claims
have attracted a number of new entrants to the
clinical negligence arena as one of the last remaining
areas where claimant solicitors can charge an hourly
rate.(NHSLA)
• “For every £1 an insurer pays in compensation in
industrial deafness claims, £3 is paid for legal fees.”
(POST)
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Funding
• “If CFA agreements are complex documents, the new
DBAs are even more impenetrable to all but the most
sophisticated and literate consumer. “ Legal
Ombudsman
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Which funding option is likely to
develop most in 2015 60
1 - CFAs and ATE
2 - CFAs, with claimants or their
solicitors paying disbursements
3 - BTE insurance
4 - Damages Based Agreements
5 - Third party funding
6 - Private funding on hourly rates
7 - Private funding on fixed fees
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Which funding option is likely to
develop most in 2015
1 - CFAs and ATE
2 - CFAs, with claimants or their
solicitors paying disbursements
3 - BTE insurance
4 - Damages Based Agreements
5 - Third party funding
6 - Private funding on hourly rates
7 - Private funding on fixed fees
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17%
23%
8%
22%
12%
0%
18%
Insurers’ experience
• Motor premiums ‘bounce’ to 1.2% increase (The AA)
• “You could say that in the last two years, insurers will
have saved at least £2.85 billion pounds in claims. 2011
figures show claims spend at £9.3 billion. This means
premiums should be down over 30%.” (Craig Budsworth,
MASS)
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Future litigation
• 1000 personal injury firms went under within 12 months
of reforms
• Only 21% of people now get advice from someone who
is a regulated lawyer (19 Nov 2014)
• “McKenzie friends…have become an important part of
the civil justice landscape.”
• “An ounce of mediation is worth a pound of arbitration
and a ton of litigation!” (Joseph Grynbaum)
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Further reform?
• “Regardless of the outcome of the next election, I do
not anticipate [reform] coming to a halt” (Nick
Parsons, FOIL President)
• “We would like to see a maximum time limit in the UK,
similar to that used in Sweden where, typically, claims
presented more than three to four days after the
accident are usually rejected," Chris Voller, AXA.
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Break
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Insurance Bill
• “The current law may be certain on paper but it is
about as unfavourable as you can get for policyholders
anywhere on the planet,” (David Hertzell, UK Law
Commissioner for Commercial and Common Law)
• “This government wants the industry to continue to
grow and provide better services to customers, which
is why we need to bring insurance contract law into
the 21st century.” (Andrea Leadsom, MP)
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Fair Presentation of Risk
• “Insurers will … need to make sure they ask potential
policyholders the right questions at proposal stage
…not asking the right questions could make it harder
going forward to decline claims” (Alexis Roberts,
Pinsent Masons)
• “BIBA is seeking to ensure that no additional
responsibilities fall upon the broker in regard to
commercial customers’ disclosure requirements that
could result in professional indemnity issues” (BIBA)
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Is this a significant change? 59
1 - No - we are obliged to act this
way already
2 - No - in practise most of the
industry behaves in this way
3 - Yes, but not for us - we/our
insurers adopt this approach,
though many others don't
4 - Yes - but the industry is
prepared for it
5 - Yes - and the industry has some
way to go before it is prepared
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Is this a significant change?
1 - No - we are obliged to act this
way already
2 - No - in practise most of the
industry behaves in this way
3 - Yes, but not for us - we/our
insurers adopt this approach,
though many others don't
4 - Yes - but the industry is
prepared for it
5 - Yes - and the industry has some
way to go before it is prepared
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15%
24%
20%
5%
36%
Remedies
• It is hoped that the insurer’s remedies will now be
more proportionate to the breach in future, and legal
disputes over claims are hoped to be greatly reduced
once the Bill is law.” (Brunel Professional Risks)
• “We will implement the principles of the
recommendations right away…we’ll be going above and
beyond the wording in some of our policies until the
paperwork catches up” (Dave Smith, Zurich)
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Basis of Contract
• “Airmic’s basis contract clause campaign bolstered
by heavy hitters” (Post July 13)
• “ ‘Basis of contract’ clauses and warranties in
relation to insurance are enforceable in law and
not contrary to law or public policy at least yet”
(Mr Justice Akenhead in Genesis v Liberty)
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Warranties
• “must be exactly complied with, whether material
to the risk or not...If it be not so complied with
then …the insurer is discharged from Liability”
(Marine Insurance Act 1906)
• “An insurer has no liability under a contract of
insurance in respect of any loss…after a warranty
…has been breached but before the breach has
been remedied (Insurance Bill)
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Impact on Fraud - will the bill: 59
1 - Increase insurance fraud, but
detection rates will remain the
same
2 - Increase fraud and reduce
detection rates
3 - Have no impact on fraud
4 - Decrease insurance fraud
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Impact on Fraud - will the bill: Impact on Fraud - will the bill:
1 - Increase insurance fraud, but
detection rates will remain the
same
2 - Increase fraud and reduce
detection rates
3 - Have no impact on fraud
4 - Decrease insurance fraud
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14%
15%
49%
22%
Contracting out?
• Will insurers try to contact out?
• What response will they meet from Brokers and
proposers
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“Underwriter shopping”
• “If a very large and high profile loss is unfairly
declined under English law, for example because of a
basis clause or a breach of warranty, some clients
might start asking their brokers for contracts to be
written under more favourable legal jurisdictions.”
(David Hertzell)
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Further changes?
• Effect of warranties limited to losses to which they
relate?
• Remedy for late payment?
• Rules on Contracting out?
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What claims related factor will have the
greatest effect on the sector in 2015 and
beyond: 49
1 - Further whiplash reforms
2 - More rigorous court costs control
3 - Clarity and flexibility in funding
options
4 - The duty of 'fair presentation'
5 - Changes to insurers remedies
6 - A crackdown on fraud
7 - Customer expectations
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What claims related factor will have the
greatest effect on the sector in 2015 and
beyond: 1 - Further whiplash reforms
2 - More rigorous court costs control
3 - Clarity and flexibility in funding
options
4 - The duty of 'fair presentation'
5 - Changes to insurers remedies
6 - A crackdown on fraud
7 - Customer expectations
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#JacksonReforms_BJ / 07557 499071
14%
24%
10%
18%
16%
8%
8%