Satellite litigation, law firms in run-off and major job losses – a vision of life after the latest PI reforms

Hughes: credit hire and deafness claims will be next

Hughes: credit hire and deafness claims will be next

The government’s personal injury reforms will trigger satellite litigation, small claimant law firms going into run-off, and big job losses at defendant law firms – but not a reduction in insurance premiums, a leading consultant has predicted.

Anthony Hughes of Jackson Hughes, a one-time president of the Forum of Insurance Lawyers, also warned that the Association of British Insurers would move onto new areas to press for reforms once it has achieved what it wants with whiplash.

With the government set to consult shortly on its plan to increase the small claims limit for personal injury cases to £5,000, and remove the right to claim general damages in low-value whiplash cases, Mr Hughes said he would put his mortgage on there being satellite litigation.

The former chief executive of defendant law firm Horwich Farrelly said: “If whiplash is banned, the definition will almost certainly be challenged by innovative lawyers. Innocent RTA victims will suddenly develop different types of injuries that the lawyers say fall outside the definition.”

Claims management companies would move into managing claims to replace the loss of referral activity, while on law firms, he said: “There are hundreds if not thousands of SME law firms who rely heavily, or in some cases entirely, on PI income. If the owners of those firms are say 55 or over, possibly approaching retirement it would not surprise me if they simply go into to run off. Stop all marketing spend, maximise cash and move on.

“This, of course, plays into the hands of the bigger firms who can operate on lower margins due to economies of scale.”

For firms that remain, routes to market would become even more vital to grab the available work, he added.

Mr Hughes reckoned that what would be a huge reduction in the number of claims would lead insurers to “rationalise” their operating models, while defendant law firms would be even harder hit than they were by LASPO, when there were “huge” job losses.

“The only logical outcome is mass consolidation of that market as firms concentrate on bigger-ticket disputes and cut overheads,” he said.

The solicitor anticipated that the anticipated £50 per policy saving from the reforms was not realistic.

“The insurance world operates in cycles depending upon market capacity and investment returns. I accept claims costs are relevant, especially if other returns are low, but are they as relevant as is being suggested? Also, an inevitable consequence of these reforms is an increase in the cost of after- and before-the-event cover, so what you gain with one hand, you lose with the other.”

Beyond that, Mr Hughes predicted that insurers would return to challenge credit hire. “Noise-induced hearing loss is very much in the cross hairs and no doubt other diseases will be considered for the fixed fee portal environment, especially with all the capacity that will be created if whiplash goes.”

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    Readers Comments

  • Newton’s 3rd law – For every action, there is an equal and opposite reaction.

    I also concur with all of what this learned gent has stated here and made this known at a Westminster forum last year when it was clear to me the agenda discussing PPI and NIHL was almost irrelevant to the direction of the meeting. Once I realised what was happening I even put this dreadful vision of the future up to the delegation when the mike was offered to the floor at questions.

    Unfortunately that mike must have been as good as switched off. I think the proposal is catastrophic for claimants, lawyers, the public purse, the NHS, the legal system and other types of claims (which are currently under control – NIHL increased as a direct result of some elements of LASPO changes). What is also surprising with this, is alongside the author’s own appraisal, I also strongly believe even the insurers themselves will eventually suffer. Let’s look at what happened after LASPO – you only have to observe the steep rise in average damages which has risen well above the proposed 10% increase as claimant law firms maximised the value of claims in order to maximise success fees. I, like this gentleman can picture new areas of damages which you could say should have been explored by lawyers prior to settlement; all equally difficult to disprove by way of normal medical analysis. I won’t mention them here for fear of sparking off a “compensation culture”. Mark my words, some are in the marketplace already creating services to allow this to happen – nothing wrong with that of course; providing claimants are indeed injured.

    The reaction? A massive increase in CMC activity and I can see they being the only potential winners, likely leading to more complaints of cold calling and harassment – ironically everything the forum was supposed to be there to debate and stop. I thought I was in a surreal world and I was the guy with the red rag trying to stop a train going down the “wrong track”. Sadly for everyone associated with this industry it would appear the brakes are not working and that someone with an interest is driving this doomed train and smiling thinking everything is well in the world!

    I just simply don’t understand the rationale which clearly has been dreamed up by a minority of people who think they have found the magic bullet.

    A message to the MOJ and FOS – move your people into the complaints department. All the “policemen” (on both sides) with vested interest of filtering out spurious claims will have disappeared from the system and without them fraud and exaggeration will undoubtedly increase and all fuelled by companies with little interest in the claimants rights. All this to the frustration of those honest motorists who I will eat my hat if they see their premiums come down.

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