Tuesday, December 10, 2019

Knock on effects of personal injury reforms

Article first published in Insurance Times April 2017

The new PI reforms have been announced and it is clear that they are going to have a significant impact on the motor claims and legal expenses market. More importantly, whilst these changes may seem comfortably distant, the reality is that the impact on motor policy sales is just months away, with policies incepted in November this year becoming the first that will need to operate under the new rules when they come into being in October 2018.

The clock is ticking and brokers must now consider how they will set about meeting customer needs and TCF requirements when recommending a motor legal expenses product. What should brokers be considering in their review?

The key elements of the reforms are:

  • The Small Claims limit for RTA-related injury claims increases from £1,000 to £5,000
  • The Small Claims limit for non-RTA cases also increases from £1,000 to £2,000
  • A new damages tariff for majority of RTA soft tissue injuries will be implemented
  • A ban on any offers to settle claims without a medical report first being obtained

With little or no coverage seen in the popular press, it’s clear that the overwhelming majority of customers are unaware of the reforms, let alone how they will be affected should they become the victim of a non-fault accident. It will fall to brokers to explain the nature and implications of the changes and, given that the reforms dictate that there will be much less help available for customers that do not have the benefit of appropriate Motor Legal Expenses Insurance (MLEI), it seems likely that there will be an increased need for such cover.

The present system sees solicitors offering their services to claimants at no cost, the reforms will see this advantages position changed, much to the customers’ detriment, as legal costs will no longer be recoverable within the small claims track. In the future, customers who choose not to take out MLEI will, in the event that they suffer a non-fault injury, be left without protection and face the difficult option of either pursuing their own ‘DIY’ claim against the responsible driver’s insurer or taking their chances with a cold calling claims farmer. Whilst the limited fees available in the small claims system make it financially difficult for solicitors to assist non-fault victims, there are concerns that claims management companies may find new ways to gain advantage, perhaps fuelling an increase in their activities. This seems entirely at odds with the Government’s stated intention to reduce the level of fraudulent and exaggerated claims; something which might have been far better addressed by a total ban on such cold calling activities and something that many had called for.

Brokers may therefore see opportunity for increased sales, with MLEI being the primary method for supporting customers with RTA related legal claims. MLEI is however a complex product and there is no ‘one size fits all’ product in this space. Careful assessment of exactly what MLEI provides is a critical factor. In particular, many existing policies explicitly exclude small claims track cases and this, post-October 2018, will leave customers with virtually no protection, the majority of injury claims falling under the proposed £5,000 small claims limit.

Another significant factor will be an understanding of how MLEI claims will be handled and by whom. Given that future claims handling models may not include claimant solicitors, it will be essential to assess the expertise of the service provider and ensure that the delivered service represents the broker’s brand in the best possible way.

Brokers should speak with their Motor Legal Expense providers now in order to clarify how they will manage the transition into the new world, starting in November, to deliver an approach for customer protection that is commercial viable. In short, all brokers need to be thinking and planning now for these changes and reviewing their current MLEI provision in order to understand how they will be adequately meeting customer demands and needs as we move into the new regime.

Whilst there are still many unknowns and choices to be made, these challenges, as with all significant market changing events, present brokers with new opportunities. In the commoditised motor insurance market anything that can create a point of difference is something to embrace as customers look for brands they trust to deliver the protection they expect.