Monday, 15 May 2017

Insurance should be a matter of conscience

Lord Chancellor Liz Truss certainly set the front pages alight when she announced that insurers would have to pay more compensation to seriously injured accident victims. Headlines predictably followed the ABI line and screamed about rises in premiums. A few days earlier, there had been almost no mention of the Ministry of Justice’s (MoJ’s) decision to ‘fix’ whiplash claims and raise the small claims court limit so high that legal representation would be either unavailable or unaffordable in a large proportion of cases.

Some of the details are still a little sketchy but if we have the motor accident threshold set at £5,000, some 90% of road accident injury claims will be ‘small’ claims where legal costs cannot be recovered and around 80% of these will have the whiplash component standardised, with a cap on fees for medical reports. Motor ATE is the most affected in terms of sales potential but BTE premiums will progressively have to rise to pay for irrecoverable costs. The insurance principle of many people paying the claims of a few becomes more difficult to apply if fewer motorists are willing to stump up the extra, taking typical add-on premiums to between £35 and £50.

In respect of clinical negligence and accident cases, are these insurers bemoaning having to pay damages in full the same ones who promised whiplash reforms would actually cut motor premiums? Are they really so callous about the most vulnerable people in society having their life-long care funded adequately – those children who have been injured at birth or motorists maimed and brain-damaged through no fault of their own? The fuss about correcting a long overdue adjustment to the Ogden Tables is shameful: changes are long overdue.

Changes to serious injury rates were talked about over a period of years, with consultation concluded nearly five years ago, while the whiplash consultation was concertinaed into just 6 weeks, over Christmas 2016.

It looks to us like a story is being spun about higher premiums while the victims have no voice. This mood is wrong and reflects badly on society in general. Many insurers’ websites have promises about their social conscience and about treating people fairly. Fine words but little evidence to substantiate them. At ARAG, we are justified in taking the high moral ground. We stand by our mantra, defined by our founder, Heinrich Fassbender, in 1935: “To enable everybody, not just those who can afford it, to assert their rights. We remain committed to equal opportunities for all.”

Which way for ATE and BTE?

We will shortly announce positive results for our trading and profitability over 2016, a new balance to our ATE and BTE exposure, and strategies to both consolidate existing business and build new areas of expertise.
It is clear that the legal framework favours BTE at the expense of ATE solutions. The future ATE focus will be on EL, PL and non-personal injury cases. We are also more clearly identifying good schemes – we now have three full time auditors visiting law firms around the country – with special attention to clinical negligence cases.
On the BTE side, we have to ensure we are not giving away too much for free:
‘extras’ in home emergency, helpline and online services all come at a cost to us and we must ensure our commitment to quality products and service cannot be compromised by concerns over competitiveness of premiums. At the same time, our London office has opened many new doors for commercial BTE schemes because so many businesses fear ever more complex employment tribunal claims.
In all our dealings, we remain committed to ensuring that customers receive excellent value and service, knowing, at all times, that the cover is fi t for their purpose. Management information such as the monitoring of claims declinature and complaints enables powerful root cause analysis that constantly shapes our future policies. This allows us to repeatedly improve the customer experience to maintain ARAG’s reputation for making affordable access to justice available to everyone. 

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