Nicholas Jervis, Solicitor (non-practising) and Managing Director of Whiplash Specialists Loyalty Law
What Will Be The Impact For Innocent Accident Victims If The Government Ploughs On With The Jackson Reforms?
Following the recent media frenzy around Jack Straw outing the insurance industry’s worst kept secret, namely the fact that it is actually insurance companies who drive up the number of people making personal injury claims because they can charge a solicitor a referral fee for each one of their insured that they refer, AXA have made a large splash across the media announcing that they will no longer be accepting referral fees. Is this a genuine attempt by AXA insurance to do the right thing?
Now call me a cynic, but when it comes to insurance companies I have good reason to be. For 14 years I dealt with insurance companies on a daily basis making personal injury claims against them on behalf of my injured clients. Now some of these clients did not have so called ‘simple’ whiplash injuries (although if you have ever suffered a whiplash injury you will know yourself that the pain experienced feels anything but ‘simple’ or trivial) but they were suffering from a variety of different injuries. I have seen insurance companies fight the responsibility of their insured for an accident right up to the day of a hearing to determine whether their insured was responsible for an accident, only to admit on the doors of the court full responsibility for the accident. This was not a one off event, it happened time and time again, not only pushing up the legal costs of a claim but more importantly delaying the day that someone whose life has been ruined by an accident receives their compensation.
I have seen insurance companies spend thousands of pounds on secret surveillance in the vein hope that they might catch the person claiming doing an activity that might cast some doubt on their integrity and allow them to shave a few hundred pounds off the compensation that they have to pay to them.
I have repeatedly seen two insurers in a car accident claim when my client was the injured party and clearly in no way responsible for the accident fight about which of them was at fault, for months or even years. All that this achieved again was to increase costs, cause the injured victim more stress and generally drag out the claim, perhaps in the hope that my client would simply want to give up and go away (but was unable to do so as the compensation was needed to rebuild their life or carry out modifications to their home so that they could live in it with the injuries sustained).
So as you can see, my first instinct based on my 21 years of experience of dealing with insurance companies (the last 7 running Loyalty Law and similar businesses) is to doubt anything that they say. So in thinking about why AXA have come out and made the statement that they will no longer be accepting referral fees, I was curious to say the least. This is an insurance company saying that they will no longer accept a fee that has been adding millions of pounds of profit to their balance sheet, so why suddenly turn away all of this profit. I am sure AXA’s shareholders will have something to say about it if there was not a plan to replace it.
AXA themselves seem to be arguing in public that the reason for the action of banning referral fees is to clean up the accident claim process, but as an insurer taking referral fees they have been a part of the problem rather than the cure, so I cannot see that this is the real reason behind their decision. What you might not know is that in October 2010 (maybe a little later now because the legislation needed is not in place) people other than solicitors will be able to run solicitors practices. These Alternative Business Structures will allow non-solicitors to own and manage law firms. In fact already Co-Op Legal Services and the RAC already have in-house legal teams. So does AXA intend to do the same and form its own law firm, which would immediately do away with the need to charge referral fees with AXA being allowed to keep all of the legal fees, not just the referral fee that they were charging until recently? If this were to happen it would mean that instead of a referral fee of £800 to £1,000 (which is a fairly standard amount for an insurer to charge a solicitor for each injured client that they refer to them) they could in future keep all of the legal fees charged, with the average legal fees being around £2,000. This of course would very quickly replace the lost millions that they will no longer be receiving from referral fees, and might appease any shareholders who have been left stunned and worried that their company has suddenly stopped taking a lucrative stream of revenue.
Of course this is all speculation on my part, but as I say my first reaction with insurance companies is to look for the ulterior motive in any of their actions, based on many years’ experience of dealing with them in personal injury claims.
However, the real issue behind all of this is the one we ought to be concerned about. The real issue does not involve AXA insurance, Loyalty Law or my thoughts on the accident claims industry, the real and only issue we should be concerned or interested in is protecting innocent accident victims. With so much media hype about so called ‘Compensation Culture’, referral fees and accident claims in general, none of the press seems to pick up on the fact that many people’s lives are completely ruined every year after suffering a serious injury through absolutely no fault of their own. Rather than focus on the fact that the vast majority of people claiming are genuine, honest people, the minority of people that make a claim for whiplash fraudulently seem to be the focus of attention.
There should not be a knee jerk reaction to the personal injury claims sector by making it harder for people to receive specialist legal representation, there should be considered debate with the victim in all of this at the heart of this debate. I have written to Jack Straw, who brought the insurers’ practice of charging referral fees and often pushing people to make claims who had no intention of doing so, explaining that the answer is not to ban referral fees, but simply to ban insurers from profiting from their insured’s injury. I have received a standard response explaining Mr Straw is ploughing on with his campaign to ban referral fees rather than listen to the opinion of someone with 21 years’ experience of helping injured victims.
How can it be right that insurers are allowed to make a profit because their insured suffers an injury (no longer AXA of course for whatever the reason)? This practice strikes me as completely immoral. Banning it overnight would immediately achieve the important objective of giving complete control and freedom of choice back to the innocent victim. They would have the choice to decide whether to make a claim for compensation, and the freedom of choice to decide who would do the best job for them (not just the solicitor who was prepared to pay the highest referral fee). Coupled with this, if the Ministry Of Justice who regulate Claims Management Companies, enforced the publicity rules and stopped the Claims Companies who regularly send spam emails and texts encouraging people to claim, this would clear up another part of the process.
People should be free to make a claim if they are injured, free to choose the best legal representation to help them and free to keep all of the compensation that is awarded to them by the court for their injuries. This is what happens now and it is an important part of access to justice in this country. Sadly, this might soon change too. The Jackson reforms are currently being hotly debated and David Cameron has recommended that they be implemented. The main thrust of these ill thought out changes by people with no experience of personal injury claims or of helping innocent people to rebuild their lives, is that in the future anyone claiming will only be able to keep a percentage of the amount awarded for their pain and suffering and not the full amount. Why should an innocent victim be told by the court one day that they need £500,000 to pay for nursing care for the remainder of their life and for adaptations to their home, only for the next day to say that they can actually only keep £r400,000 because the rest has to be spent on legal fees due to the Government making a change to the law fuelled by all the stories pushed out to the media often by insurance companies. (For more information on this please read (and sign) our petition here: http://www.loyaltylaw.com/petition/)
David Cameron, MP for Witney and Prime Minister, I hope you read this and can see how devastating these changes could be to your constituents and the people of England and Wales. Please bring some order and sense to the Jackson Reforms, take the action suggested above of banning insurers from profiting from their insured’s misfortune, ask your Ministry of Justice to enforce the laws already in place to stop some of the larger Claims Management Companies from breaching the laws already in place by spam texting and emailing, and you will immediately free up a lot of time in the House to debate other issues that are important to this country!
Nicholas Jervis
Solicitor (non-practising) and Managing Director of Loyalty Law.
Sadly the insurance companies in the UK are just like those in US. They will never do anything unless it benefits there business, or them directly. Period.