Posted by Malcolm Roberts, managing director of Litigation Futures sponsor Beechwood Solutions Ltd
It’s now two months since ‘J Day’ and life as a CFA sign up agency has in fact changed much less than we expected. Accidents are still happening, solicitors and claims management companies are still marketing and we are still receiving instructions.
So what can we report from the sofas and firesides of the claimants we have been visiting since the new regime came in? By and large clients’ reaction to seeing part of their compensation being retained by their solicitors has been a collective shrug of the shoulders, whiplash permitting.
The thing is that, in our experience, clients always thought that they would pay in the end; they just didn’t know how much and where the bill would come from, despite everything they had been told. Now the deal, as they see it, is much more transparent and more palatable because of that. A case of better the devil you can see than the devil you can’t. We, of course, understand that the client’s position is now vastly inferior to before; however, as in most aspects of life, perception overrules reality.
The subject that may still be regarded as far from settled is that of after-the-event (ATE) insurance. Initially there were different schools of thought regarding whether clients should pay for this, or the cost should be absorbed within the 25% of damages to be retained. Both sides of the debate vigorously argued their stance, but the prevailing wisdom now is that this is a disbursement for which the client is responsible.
The question that remains is whether the benefit provided justifies the cost. I’m very glad that it’s not within my remit to advise clients on this, or to decide how much it should be. My feeling, though, is that if it were cheap enough, then the vast majority of clients would simply tick the ‘yes’ box to enjoy the security of complete protection. If that were the case, then the many would be contributing to assist the few who needed to rely on the cover, as is the normal basis on which insurance works.
On the other hand, if the cost of ATE is comparable to the sort of purchase that most clients would have a good long think about, then only those with very weak claims may take it up, resulting in an ever decreasing spiral of decline for ATE providers.
Prior to J Day there were many voicing doom and gloom predictions, but one thing is abundantly clear: the demand from the public for accident compensation is a juggernaut that is gaining speed. Some 600,000 people a year are successfully claiming and if each one of those tells just five others of their experience, the gap between those who could claim and those who do will inevitably narrow.
That provides an enviable platform for this business sector. The future challenge lies in being able to satisfy that demand profitably.