As featured in the Insurance Times (28/10/2011): In the heat of the debate over referral fees and other reforms to the RTA injury claims process, it is surprising why this question is not being asked. There is much talk and general agreement that the claims process is dysfunctional, not least because the process for hundreds of thousands of small injury claims is over-engineered.

The problem stems from the fact that injury claims are almost always automatically referred to lawyers at the outset, regardless of the degree of simplicity or complexity involved, or even whether the claim will actually be disputed or not. The majority of injury claims are small, soft tissue injuries and the liability matrix is very straightforward for most RTA circumstances. Despite this, all these small claims are referred to law firms at the outset, without giving claimants any choice of alternatives. The claim is then forced to proceed down a one-size-fits-all legal process.

Ask the right questions

Why not first of all find out if the claim is even going to be disputed? If not, then where is the legal issue? Lawyers are here to defend or enforce people’s rights. So unless a claim is being disputed, or there is a complex issue requiring legal advice, why are lawyers automatically retained? If a claim is not disputed, claimants need medical advice, an independent valuation of their claim and an offer from the fault insurer – all of this can be done without a lawyer. InterResolve has given claimants this choice in thousands of claims, but only around 3% have chosen legal representation.

“The market is crying out for alternatives that work better and are much more cost-effective”

Third-party assistance programmes from fault insurers come close to providing a solution and a choice for claimants as to whether they want to settle direct or seek legal representation. It would be arrogant to argue that claimants should not have this choice. However, while these programmes give claimants a choice, they lack the important element of independence. Claimants need impartial independent advice on what they are entitled to prior to settling their claim. There are an increasing number of valuation tools available that can provide this, especially for small claims, but it needs to be provided by a third party rather than the insurer.

Giving the customer a choice

The market is crying out for alternatives that work better and are much more cost-effective. Alternatives are available at a much lower cost than legal fees, but these alternatives remain largely unused. Maybe if referral fees are banned, insurers, brokers and others might look more closely at their customers’ journey, where they need to pursue a claim for damages. Maybe they will view it as inappropriate – even a disservice – to automatically refer their customers into the hands of lawyers and a legal process that is alien for most ordinary people without giving them any choice first. Maybe they will decide it is right to give their customers a choice after all, especially in small claims that are likely to be admitted.

Nobody would deny claimants’ access to justice if there is a dispute or medically complex prognosis where lawyers may be needed. But for the hundreds of thousands of small claims where legitimate claimants just want their claims resolved without a complex process, alternatives already exist. These can establish liability before lawyers are retained, arrange independent medical care and independent claims valuation and use informed mediation to settle claims – all without needing an unwieldy legal process and excessive costs.

Why shouldn’t claimants have a choice?

Peter Ashdown-Barr is chief executive of InterResolve

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