It’s perhaps not quite as divisive as Brexit, but the arguments surrounding the Civil Liability Act 2018 – addressing the compensation culture versus protecting access to justice – sit deep in the world of personal injury (PI).
On the one hand, the compensation culture that the Act should address is welcomed, especially if the government really can ensure the cost savings are passed onto all motorists. On the other, genuine victims of injury resulting from the negligence of others, which may of course be ‘you’, may no longer be able to access justice.
A social and economic good, or an assault on access to justice? Motor insurers sit on the other side of claimant solicitors and claims management companies (CMCs) with gusto.
As an after-the-event (ATE) insurer, we would be lying if we said that the Act won’t impact our business. But unlike Brexit, there is no hope that this will be reversed, despite there being little substantive detail yet on the new portal, doubts as to whether MedCo will even be ready and April 2020 looming menacingly bigger than anyone would like.
This means that, rather than crying over spilt milk, the focus has to be on the future – a future which might look dark for many practitioners but may in fact be an opportunity for real market improvement.
No market has ever stood still, even when the sun is shining. For all those vested to protect the status quo, evolution drives change, sometimes in the most disruptive way. The Civil Liability Act 2018 may just do that to the PI market.
From a commercial perspective, the legal industry is fragmented, hugely inefficient and operated on a business model outdated in most other sectors by a few decades.
The modern law firm looks beyond law, diversifying revenue streams by service, product, geography and even earning methods (i.e. not just the hourly fee). Law firms are hiring non-lawyers to run their business and getting listings, consolidation is only growing helped by hungry M&A bankers looking for opportunities, and technology is changing the way law is practised.
As an ATE insurer, we have always sought to work with high-quality PI solicitors. The fact that we have to articulate “high quality” is because there is a huge underbelly of not-so-high-quality PI solicitors, many of whom we have ceased to even communicate with.
Any bill that helps consolidate the industry into a smaller number of higher-quality law firms (the recent launch of Caresso Law being one such potential) can be no bad thing.
This also applies to CMCs. Being regulated by the Financial Conduct Authority may not have pleased them given the handsome profits they used to make, but it is a step in the right direction.
Despite many scrambling around for survival by hunting for the next whiplash – anecdotally, Acasta has in 2019 alone been presented with over 80 new opportunities across 16 different types of claims by CMCs – a Darwinistic slimming-down to a pool of high-quality CMCs can be no bad thing for the overall justice system.
Technology and innovation
The introduction of the claims portal brought hope of greater efficiency, quicker decision-making, costs savings and more reliable validation. The new portal is supposed to broaden this in response to the tighter restrictions of the Act.
Insuretech and legaltech companies are constantly evolving to develop technologies that cannot only speed up processes but also use enhanced data analytic tools, or even artificial intelligence, to help arrive at decisions more quickly and reliably.
The Act will reduce a large number of whiplash claims by elevating the hurdle, but while the target are the fraudulent claims, some genuine claims will inevitably fall by the wayside.
But rather than lowering the hurdle, this is precisely the kind of challenge that technology not only loves to embrace but can resolve. To isolate the genuine claims and help give them access to justice is what technology can deliver. (How is another article in itself.)
It is a sad reality that the legal industry, by the standards of the broader commercial world, is technologically primitive and frankly regressive. The Act, however, will by necessity drive law firms to embrace technology to create greater efficiencies that allow the smaller value claims to be viable. Those that won’t will fail.
Costs is an evolving matter
It is easy to forget that the costs regime is a constantly evolving and defining area. In much the same way that the Act is changing the landscape as LASPO did before, so the landscape will change again after the impact of the Act has been felt.
Notwithstanding that it is not unfathomable that a general election before April 2020 is held and a change in government might repeal the Act, the Civil Liability Act 2018 will highlight further issues – some intended, some unintended – which will then need to be addressed.
Whether that may be fixed recoverable costs, the tariffs or the small claims track limit, it is inevitable that this area will continue to evolve as it is important to achieve both lower motor insurance premia and improving access to justice.
On that note, one obvious way in which the desired effect of the Act can be achieved while helping improving access to justice is to reintroduce the recoverability of ATE premiums. Clearly, as an ATE insurer, I would say that, but if a case had strong merits regardless of the size, ATE would empower genuine claimants to proceed with meritorious claims and encourage quicker, more reasonable settlements.
Perhaps this should be the next area for re-consideration in the world of litigation.
The impact of the Civil Liability Act, including on legal expenses insurance, will be debated at our PI Futures conference on 25 September in Manchester. Tickets are still avaiable.