Annual Insurance Event 2014 - 3 December 2014

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

Tweet or text your questions:

#JacksonReforms_BJ / 07557 499071

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)



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



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



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



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)



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”



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.



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



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)



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



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



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)



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)



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



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



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



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)



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)



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.



Break



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)



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)



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



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



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)



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)



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)



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



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



14%

15%

49%

22%

Contracting out?

• Will insurers try to contact out?

• What response will they meet from Brokers and

proposers



“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)



Further changes?

• Effect of warranties limited to losses to which they

relate?

• Remedy for late payment?

• Rules on Contracting out?



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



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



14%

24%

10%

18%

16%

8%

8%

Annual Insurance Event 2014 - 3 December 2014

Law

Transcript of Annual Insurance Event 2014 - 3 December 2014