The Many-Headed Hydra of Fraud - Catherine Burt & Kate Abrahams, DAC Beachcroft

14/12/16. Organised crime gangs, illegal and unethical practices in the claims industry, and a persistent compensation culture are all combining to create a costly problem for insurers that is to the ultimate detriment of policyholders.

Despite various initiatives by law makers and insurers, motor fraud persists, and recent years have seen criminals and rogue elements within the claims management industry search for new and inventive ways to defraud insurers. The insurance industry has had successes, but the battle is by no means won. Those who make their living from fraud continue to look for new opportunities to exploit,” says Catherine Burt, National Head of Counter Fraud at international law firm DAC Beachcroft.

Systemic fraud

One of the biggest drivers continues to be the conduct of some claims management firms and claimant solicitors. As reforms have reduced opportunities for referral fees and escalating costs, fraudsters have found ways to build their income through layering profit into multiple heads of loss with fictitious or exaggerated elements of the claim. This has included claims for exaggerated or sometimes non-existent physiotherapy, cognitive behavioural therapy (CBT), interpreters’ fees, recovery, storage and hire, as well as many other types of exaggeration.

“It has become clear that it is enablers who are facilitating this multifaceted approach to fraud, revealing the extensive networks that exist behind many fraud claims,” says Kate Abrahams, Head of Intelligence at DAC Beachcroft.

These networks are still driving the volume claims market, including low speed impact cases.

Some rogue claimant solicitors continue to present fraudulent claims – claims where they have no instruction, where there is no personal injury or even an accident. There is also evidence that unscrupulous claims management companies continue to harass and coerce potential claimants into making a claim, even where they have no merit.

Figures from the Association of British Insurers show that 83% of people have been contacted by a claims management company. Alarmingly, 92% of those were called despite not having been in an accident or taken out a relevant policy.

Deafness claims / slips and trips

Fraudsters have diversified the types of claims they are prepared to submit, such as public liability and disease claims. Deafness claims notifications have grown steadily since 2005, when there were around 10,000 cases, to a peak of 85,000 in 2013, according to the Institute of Actuaries GIRO Deafness Claims Working Party.

Claims management companies and solicitors have been actively targeting deafness claims and public liability claims arising from pot holes and loose flagstones. Stories of fraudulent practices and persistent nuisance calls are emerging – while the sharp increase in low severity deafness claims hints at claims farming, according to David Williams, Partner at DAC Beachcroft.

Planning your response

Slaying the hydra will require a multifaceted response, ranging from tougher regulation of the claims industry, to the sharing of data and intelligence and measures to tackle cultural attitudes to defrauding insurers.

The Insurance Fraud Taskforce report published in January 2016 called for more stringent enforcement of claims management company regulation and a tougher approach by the Solicitors Regulation Authority (SRA) to fraud.

In March, the government announced its plans to subject claims management companies to tougher regulation, transferring supervisory responsibility for the sector from the Ministry of Justice to the Financial Conduct Authority (FCA). The move will make senior managers at claims management companies personally accountable for their firm’s conduct under the FCA’s senior managers’ regime.

The volume claims market and the organised fraud threat both require a sophisticated set of ‘know your opponent’ strategies and the deployment of meaningful sanctions.

There is also a need continually to challenge the perception among some that it is acceptable to defraud insurers. And there are signs that attitudes are changing: research for Aviva found that falsifying injuries on a motor insurance claim is considered worse than purchasing stolen goods and as unacceptable as drink-driving.

The revival of the proposed government reforms to increase the small claims limit and remove general damages for minor whiplash is encouraging and greater enforcement by the courts and the use of sanctions such as restorative justice may change behaviour and act as a deterrent to people who think it is acceptable to exaggerate or bring unmerited claims.

Catherine Burt is National Head of Counter Fraud at international law firm DAC Beachcroft.
Kate Abrahams is Head of Intelligence at DAC Beachcroft.

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Jackson’s Children: Recoverability of Success Fees in Child Claimant Cases - Jake Rowley, Farrar’s Building

07/12/16. With the implementation of the Jackson Reforms came a complete overhaul of the status and recoverability of success fees and ATE premiums. Gone were the days of presenting a bill at the Defendant’s door for payment and instead, in its place was transplanted a new regime pursuant to which solicitors acting for claimants were to look to their own clients for repayment of those sums. Child claimant’s, for whom special protective provisions exist in CPR Part 21, were no exception.

One problem, seemingly overlooked at the time of ushering in the new dawn of Jackson, was that the Civil Procedure Rules framework which existed at that time in relation to child claimants was unfit for purpose as regards providing a coherent system not only (i) to allow litigation friends, who had entered into Conditional Fee Agreements with success fees on behalf of the child claimant, to apply to have those sums satisfied out of the child’s damages, but also unfit (ii) to provide Judges at first instance with a clear and unambiguous power to entertain such requests and the approach that should be adopted to consider the same.

Much needed amendment came by way of the 78^th and 79^th Updates to the Rules, which came into force on the 6^th April 2015.

The Old Regime

Under the ‘old regime’, pursuant to CPR r. 46.4, the “general rule” was that where sums were to be paid from a child’s money the Court had to order a detailed assessment of those sums unless the matter could be brought within one of the exceptions contained in PD46, paragraph 2.1, namely that there, “is no need to do so to protect the interest of the child…” (para 2.1(a)) or “where another party has agreed to pay a specified sum in respect of the cost of the child […] and the legal representative acting for the child or protected party has waived the right to claim further costs” (para 2.1(b)).

The very clear statement in the rules and practice direction that a detailed assessment was required save in those limited circumstances set out above meant that many Judges understandably felt constrained, and unable to acceded to a request to make any payment out to satisfy a success fee at an infant approval hearing on a summary basis. It is difficult not to have sympathy with that approach; after all, the Court’s duty is to protect the child’s interests.

The Necessary Amendments

The changes that came into force on the 6^th April 2015 were of critical importance for anyone acting on behalf of a child claimant and who had...

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Book review: 'Legal Mind: Contemporary Issues in Psychological Injury and Law by Dr Hugh Koch' - Editorial

05/12/16. This book is a detailed guide to some of the issues which can arise in relation to expert evidence with respect to psychological injury claims. It examines first diagnosis, treatment and prognosis and then moves on to specific evidential issues such as causation and reliability of evidence. There then follows a guide to understanding the experts and another to understanding lawyers (a tall order perhaps!)

The tone is practical and also topical with a look at issues such as the use of joint opinion and hottubbing among others. This is a thorough and thought-provoking book aimed at both experts and lawyers and provides a worthwhile and helpful contribution to the whole issue of expert psychological evidence.

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