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26 February 2003

Insurer and lawyers reject calls for employer liability reforms

Misleading claims being made by insurance industry

Fundamental reform of Employers' Liability Compulsory Insurance (EL) will not resolve the so-called crisis in insurance, according to both the UK's biggest personal injury claimant law firm and a major provider of EL insurance.

St Paul, the sixth largest provider of EL in the UK, has teamed up with Thompsons Solicitors, the country's biggest personal injury claimant law firm, to tackle the misleading claims being made by the insurance industry in relation to insurance premiums.

In an unprecedented joint response to the Department for Work and Pensions' review of EL, Thompsons and St Paul demand an end to calls for reforms "that will ultimately make the victims of injury pay for the past mistakes and poor planning of the insurance industry and employers".

Together there is no opposition to improving systems but both firms believe that responsibility for the crisis perceived by the insurance industry is due to  insurers pursuing business at ever lower and uneconomic premiums and failure to anticipate what the government describes as "acute market adjustment".

"Today's 'crisis' arises from historical 'bundling' of liability insurances, poor prediction of future trends and an over-reliance on investment income," the joint submission states.

With litigation already falling, apparently as the intended result of the Civil Justice reforms, St Paul and Thompsons predict that pressure on the insurance industry will ease in the medium to long term.

They also point out that the problem is not claims with major catastrophic injuries, but  the small claims that drag on with time wasted as a result of inefficient claims handling by some insurance companies.

Allegations by the Association of British Insurers and others that legal costs make up around 40% of the total claims cost cannot go unchallenged, Thompsons and St Paul state. Fixed costs for lawyers are not the answer, but more efficient claims handling by insurers.

"Despite knowing they will pay in more than 90% of all EL cases they allowed the ludicrous situation where the claimant gets £2,000 and the lawyer £4,000. This is totally avoidable under the present system, particularly by using the pre-action protocol, if claims are managed effectively.

"It appears too many cases are being fought by insurers on issues that are not relevant. Unnecessary arguments still occur over contributory negligence. Insurers should concentrate on causation. Causation not liability is key to keeping costs down."

Sadly, in the experience of both Thompsons and St Paul, inexperienced claims handlers appear not to understand the issues, including the importance of differentiating between disease and accidents.

While no one wants to see employers go to the wall over insurance premiums, the fact is that most employers will get insurance. It is hoped that the ABI will provide some hard evidence to back up its claims about insurance being denied, but it and the government might do well to ponder who is being denied insurance. Is it the responsible employers with good health and safety records or the potential death traps? If in that sense alone EL acts as a regulator of employers' fitness to employ, then it must be allowed to continue to do so.

St Paul and Thompsons do not support the no fault system proposed by the ABI. Such a system, including one run by a government scheme, will not put the genuine victim first.

The effective substitute for a fault based, or even a "no fault" system, is a system of strict liability. That way lawyers can't make money proving fault and insurers can't waste money defending the indefensible.

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