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Insurers trying to make fools of Government over whiplash savings - Phil Sherwood, President of CILEx

05/06/19. The Association of British Insurers recently reported that following the personal injury reforms enacted by the Civil Liability Act, they are passing savings on to consumers in the form of lower motor premiums which saw a fall of £24 in the first three quarters of 2018. Whilst this is good news, it simply isn’t plausible to relate this to reforms that are yet to be implemented.

As well as raising the question of whether the reforms were even needed in the first place, this announcement has raised concerns amongst our members working in personal injury, that this narrative may be used to justify a failure to pass future savings on. If so, this would go against the promises the Government made during the Act’s passage through Parliament.

CILEx has voiced these concerns in its recent response to HM Treasury’s consultation on how insurers will report on the impact of the reforms on their businesses.

For us it is vital that a direct causal link be drawn between the Act’s implemented reforms and reductions in insurance premiums, independent of any other possible factors. We want to see strong measures put in place to force insurers to publish relevant, detailed data so that the true savings can be understood and seen to be reflected in premiums.

This means insurers disclosing complete data sets for premiums and settlements, not just averages alone, so that the impact of the reforms can be properly understood.

The current proposals to allow firms to self-determine whether they fall within the scope of the reporting requirements are not sufficient. Instead all insurers should be automatically considered unless they are able to provide the Financial Conduct Authority (FCA) with clear evidence that they do not meet the thresholds set. If the government does go ahead with self-reporting, the FCA must be clear on what punitive measures will be applied to those who declare wrongly.

One of the central points of contention around the passage of the Civil Liability Act was that unrepresented claimants would be required to go up against lawyer-represented insurers. We want to see insurers provide data on their legal costs and whether any reductions fall in line with the loss of legal support for injured persons. Regulations requiring insurers to disclose their spending on legal costs in defending claims, both for external lawyers and in-house legal costs, would allow for an assessment of whether the reforms have resulted in an inequality of arms between defendants and claimants in personal injury cases.

When finalising the process through which savings will be reported, I hope that the Treasury makes sure that insurers are reporting detailed data, not just averages, and are not able to side-step scrutiny by failing to opt in. Both insurers, and the public, deserve to know what penalty would be in store for those who failed to declare.

There remains a question mark over whether these reforms are needed at all, but given the legislation has now been passed, we need to ensure that, assuming the promised savings materialise, that it is consumers, not insurers who benefit.

Phil Sherwood is President of the Chartered Institute of Legal Executives (CILEx)

 

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