Essential: All Party Group recommends extending Health & Safety Fees for Intervention

I recently blogged about protection against payment of Health & Safety Executive (HSE) Fees for Intervention (FFI) for businesses regulated by HSE available under our Commercial suite of products. (“Covered: health & Safety Executive Fees for Intervention”, posted 8 October). It seems that the Government has realised that local authorities might also benefit, if their health & Safety enforcement teams were able to claw back administrative costs. 

The All-Party Parliamentary Group on Occupational Safety and Health (APPGOSH) has published a report, "Local Authorities and Health and Safety"  which challenges the assumption that workplaces which are regulated by local authorities (as opposed to the HSE), such as offices, shops, warehouses, and pubs and clubs, necessarily carry a lower health and safety risk. The report points to the high rates of injury and illness in warehouses, and of occupational disease in offices (stress), supermarkets (musculoskeletal disorders), and pubs (violence). 

Report recommendations include:

• placing more emphasis during inspections on health, rather than just safety;
• re-introducing compulsory pro-active inspection for all new premises or businesses regulated by the local authorities
• extending fees for intervention (FFI) to local authority-regulated activities.

FFI was introduced in October 2012, allowing the Health & Safety Executive to charge businesses in the sectors that it regulates for the costs of regulation at a rate of £129 per hour. Further information about FFI can be found in my earlier blog. 

Faster and free - Your clients’ right to medical records under GDPR?

The introduction of the General Data Protection Regulation (GDPR) back in May generated a lot of uncertainty and work for businesses but created clear benefits for us all as individual “data subjects”. One up-side that went largely unnoticed is the right for clinical negligence claimants to have free access to their medical records.

Before this summer, even just the mention of GDPR might be met with groans from colleagues tired of hearing about this important but inevitably complex piece of legislation that all of us in any sort of business had to get our heads around, to some extent.

However, one specific aspect that has been of particular interest to all of us who work on behalf of people who have been harmed by medical malpractice, is the impact that the Regulation has had on accessing a client’s medical records.

The right to see the information that medical professionals have recorded about us isn’t new, of course. Such rights were certainly codified under GDPR’s predecessor the Data Protection Act in 1998 and, to a limited extent, the Access to Medical Reports Act back in 1988.

Two key aspects of GDPR have already had a significant impact on how such matters are progressed. First, the regulation has reduced the amount of time that an organisation has to respond to a subject access request (SAR) from 40 to 30 calendar days, speeding up the process of assessing a claim which should be ultimately beneficial for all parties.

Second, and perhaps more important, has been GDPRs provision that organisations are no longer permitted to charge an administration fee for responding to a SAR, in most instances. As well as making it easier for prospective clinical negligence clients to get hold of their medical records before a specialist solicitor assesses the merits of their case, this also has the effect of speeding up the claims process. 

These implications of GDPR are not entirely uncontentious and there has been some resistance, particularly for some smaller medical organisations such as GP surgeries, claiming to be overwhelmed by the demand to review large, historic medical files in order to redact data about any third parties who may not have consented to the release of any information about them.

There remains some uncertainty around precisely where such responsibilities fall but, on the whole, GDPR appears to have supplied a rare improvement for claimants trying to assert their legal rights in what are often the most difficult of circumstances.

While surveying its members on the impact of such requests, the BMA has produced some useful guidance for the medical profession about GDPR, particularly its FAQs related to SARs.

Like all legislation, there are clearly some wrinkles that still need to be ironed out. Nonetheless, anything that speeds up the lengthy process of seeking redress for injury caused by clinical negligence can only be a good thing, for all parties involved.

Covered: Health & Safety Executive Fees for Intervention

The inclusion of cover that pays Health & Safety Executive Fees for Intervention (FFI) has attracted positive feedback following the relaunch of our commercial products in the Spring. Here’s some further information about FFI that’s aimed at helping agents explain what the new cover is and how enhances the value of the products. 

Background

• Fee for Intervention (FFI) is a “cost recovery scheme” operated by the Health & Safety Executive (HSE). Under the Health and Safety (Fees) Regulations 2012.    
• Under the Health and Safety (Fees) Regulations 2012, workplaces in ‘material breach’ of health and safety laws are liable for recovery of the HSE’s costs for any inspection, investigation and enforcement action that is undertaken. A ‘material breach’ occurs when the HSE issues a notification of contravention, an improvement or prohibition notice, or a prosecution.
• When criminal proceedings are started, FFI cease and criminal prosecution costs apply. (Note - prosecution costs are not covered by LEI, but the cost of legal representation is).
• From October 1, 2012, the HSE have been able to recover the costs of its interventions from businesses found to be in material breach of the law, even in the absence of a prosecution.
• If the HSE intervenes they are under a legal duty to recover costs in all cases where there is (i) a material breach of health and safety law and (ii) a requirement to rectify the breach is made in writing.
• There does not have to be an incident or prosecution to trigger such HSE involvement

Scope of FFI 

Sectors regulated by the HSE include: factories, mines, schools, fairgrounds, nursing homes, government premises, dentists and doctors’ surgeries. (Other occupations are regulated by  local authorities which do not operate a fee regime).

FFI applies to public and limited companies, partnerships, the Crown and public bodies, and to self-employed people.

It does not apply to:

• Self-employed people who only put themselves at risk
• Employees (Partners are not employees) 
• Work where another HSE fee is already payable (for some or all of that work), e.g. under the Control of Major Accident Hazards Regulations 1999

Other organisations that enforce health and safety law, such as the police or local authorities, will not be able to recover their costs under FFI.

FFI Charges 

Inspection with no action taken: No costs will be recovered
Inspection resulting in an email or letter: £750
Inspection resulting in a notice being issued: £1500

Full investigation: Ranges from approximately £750 through to several thousands of pounds.

HSE will invoice the business and expect payment within 30 days. A complaints process is available allowing businesses to bring a complaint about an invoice and HSE will explain the process when a charge is levied.

ARAG’s position

In our view, FFI are not fines and they have not been introduced as a civil penalty - but solely to support Government policy which requires that service users should pay for the costs of the services they use. HSE policy guidance makes it clear that the purpose of FFI is to recoup costs, and of course exposure to FFI may encourage good H & S practice. The law does not prohibit the use of insurance as a funding mechanism.

FFI could be considered similar to an order for opponents’ costs in a civil case, but the charges relate to internal admin, rather than legal costs incurred. Including indemnity for FFI for commercial policyholders completes a ring of protection by extending indemnity that has always been available for legal costs to appeal H & S enforcements notices, and to defend prosecutions.   

Since data has become available that allowed us to calculate the risk, we were pleased to add FFI cover as part of the May 2018 relaunch of commercial products. 

Notifying claims

We cannot settle FFI invoices until they have been raised, but policyholders should tell us about H & S activity as soon as they are aware that the H & S Exec has identified non-compliance that will incur FFI charges. We may also be dealing with a claim to appeal against an improvement or prohibition notice that relates to the intervention that has resulted in liability for FFI. If that is the case, customers should quote the reference of any claim that relates to the same event. FFI invoices should be sent to us promptly for payment.  

Supporting Our Superhero Brokers

For a lot of us, learning is something we associate with our younger years and school, college, sixth form or university. Our later years are traditionally just for work.

Recently though this has been changing. More and more people are seeking out new skills and information, both to stay ahead in their careers and exercise their minds. The NHS advises adults continue to learn for their entire lives to keep up their mental wellbeing.

Continued professional learning and mental wellbeing  are a huge focus for us as a business. This year we've been working on something to mirror what we are doing internally and offer our business partners the same opportunity to learn.



To do this we're launching a completely free online training platform. This platform is designed to be a simple, easy to use way to get you intimately familiar with our products and services. It's available on your desktop just through your web browser, or on any iPhone, iPad or Android device using the EduMe app. You can see a sample of what the platform looks like on the right.

Our first module is an introduction to legal expenses insurance, then there is a specific module to help you get to grips with our recently relaunched Essential Business Legal.

The training platform has been tested and trialled both internally at ARAG and externally with some of our business partners to very positive feedback. It could even qualify towards the continual professional development (CPD) hours you need for this year, to find out if it does speak to your supervisor or compliance team.

To get started with the ARAG training platform all you need to do is click here. You'll need to sign up with your email and a password, and don't worry we won't be using your data for any marketing.

It's completely free and we'll be adding new modules on other products and services in the future so you might want to bookmark the site so you can check back.

A judge has ruled that a business that acted on behalf of a landlord to evict a tenant “crossed the line” in carrying out regulated legal services that only qualified solicitors are permitted to provide. Here’s a link to the full story which appeared on Litigation Future’s website: 

https://www.legalfutures.co.uk/latest-news/unregulated-eviction-service-crossed-line-into-litigation

It’s easy to see how landlords are tempted to use services such as “Remove a tenant” as an alternative to representing themselves, or paying for solicitor representation in legal proceedings. Not only did “Remove a tenant” break the law, the legal notice that they issued to repossess the property was faulty. The landlord had to go back to court to proceed with their claim using alternative grounds to repossess their property.

Legal expenses insurance for landlords provides a helpline to talk through correctly issuing a landlord’s notice to repossess and ARAG’s Landlord Legal Solutions policy allows your landlord clients to download the notices and a covering letter for free from our legal services website. If a tenant fails to leave on expiry of the notice, the policy pays legal costs for a regulated law firm to act for the insured.

According from their website “Remove a tenant” charge from £50 to issue a repossession notice, and the cost of preparing for a court hearing and representation is charged from £250 (+VAT) http://www.removeatenant.co.uk/legal-services/ - this is much more than the cost of Landlord’s Legal Solutions over the average term of a tenancy. Surely peace of mind and confidence that claims will be dealt with properly is surely an attractive prospect for customers who may be reluctant to opt in to legal expenses? I’ll leave you to guess the moral of this story...

What Every Innovator Needs To Know About R&D Tax Credits

From time to time we receive queries about particular HMRC regulations and whether we cover claims that arise from them under Essential Business Legal and our other commercial products. 

The topic of self-employed contractors, who provide their services through a service company and are subject to “IR35” comes up from time to time. (The answer is “yes”, we will deal with HMRC enquiries and disputes for self- employed contractors provided that the conditions of the policy have been met). Last week, we had a query that hasn’t come up before - about Research & Development (R&D) tax credits. 

If you have clients that engage in innovative projects in science and technology, you may be interested in this. 

About R&D Tax Credits

R&D tax credits can be claimed by companies which have incurred expenditure on innovative projects in science and technology. They can be claimed by a range of companies that seek to research or develop an advance in their field. HMRC define the types of project that qualify for R&D credits. E.G:

• The work must be part of a specific project to make an advance in science or technology.
• It can't be an advance within a social science like economics or a theoretical field like pure mathematics.
• The project must relate to the company's trade - either and existing one, or one that they intend to start up based on the results of the R&D.
• To get R&D relief the business must explain how a project:
• looked for an advance in science and technology
• had to overcome uncertainty
• tried to overcome this uncertainty
• couldn't be easily worked out by a professional in the field

SME R&D relief allows companies with up to 500 employees to:

• deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
• claim a tax credit if the company is loss making, worth up to 145% of the surrenderable loss

A different significantly less generous scheme applies for larger firms and I‘ve included a link below for more information:

https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium-sized-enterprises#how-to-claim-rd-relief

According to a post by one lawyer firm, the HMRC’s large business directorate is challenging more tax relief claims and the sum being disputed in relation to R&D tax credit claims nearly quadrupled in 2017, up from £90m to £425m for large businesses.

Claiming R&D Tax Credits 

Businesses can make a claim for R&D Tax credits when they fill in their Corporation Tax self- assessment return by calculating their expenditure on R&D and supporting their claim with suitable information.

Does Cover Apply If HMRC Challenge R&D Tax Credits Claimed? 

Good news! Essential Business legal will come to the rescue if HMRC investigate the insured’s Corporation Tax self-assessment return and raise a challenge about a tax credit claim provided that fraud has not been alleged of course, and that the return has been submitted to HMRC on time. 

One innovation deserves another. We hope that your innovative clients enjoy the peace of mind provided by our innovative (relaunched) Essential Business Legal and other Commercial legal expenses insurance products!

Have you and your clients registered with our Business Legal services website to receive free monthly business law bulletins?

This month’s bulletin is out. Subscribers can read about “last straw” resignations – which can expose businesses to claims for unfair dismissal, get practical advice and brush up on disability discrimination law and there’s also an item on planning law.

To receive our monthly business law bulletins, you will need to opt-in when prompted at the time you register to use the site for the first time. Registration is simple and will give you/your clients access to the law guide and a comprehensive range of sophisticated legal documents which can be customised to meet circumstances. The result is far superior to using flat template documents that have to be amended to meet business needs and our documents can be relied upon in court without seeking further legal guidance.

If you’ve already registered to use the Business Legal Services web site but didn’t opt-in to receive our business bulletins, you can change your preferences by clicking through to “My Account”.

Here today, gone tomorrow

Following last month’s news of the collapse of CBL Insurance and the subsequent failure of Denmark’s Alpha Insurance, Head of Sales Andy Talbot, considers where the next legal expenses underwriting failure may occur.

In 2016, it was AU Insurance Services. Last summer, it was Elite Insurance Company. Already in 2018, New Zealand’s CBL Insurance Limited has collapsed leaving Alpha Insurance A/S in solvent liquidation and run-off.

Often, it seems, these failures impacting the legal expenses sector get associated with the ATE market, somehow remote from the majority of brokers. But most legal expenses underwriters, wherever they are based, will have feet in both ATE and BTE camps.

Alpha is a case in point, having underwritten numerous motor legal protection and other policies for brokers around the country, as well as some ATE business.

The precise causes and circumstances of these failures (and the several others that have occurred in between them) may be very different, but they have all left brokers, other intermediaries and their clients in the lurch.

In most cases, clients are unlikely to be impacted if a change of underwriter is forced on their insurance provider. Some consolation for brokers who have to go back to the market, find a new underwriter or product and undertake all the subsequent work that such failures inevitably trigger. 

What is troubling is the frequency with which such failures seem to be occurring.

The legal expenses insurance market has not been an easy one in recent years. Increased regulation, LASPO, numerous other legislative changes and even the succession of IPT rate increases have all put pressure on smaller LEI providers.

Some underwriters have also been more vulnerable to the impact of continued uncertainty over EEA passporting rules, resulting from the Brexit vote, and there are likely to be more legislative changes to come. Proposals to change the way “whiplash” claims are handled and raise small claims court limits could seriously undermine the business models of some LEI providers and trouble their underwriters.

Brokers have good reason to be cautious. Alpha Insurance is only the latest underwriter to exit the legal expenses market. It is highly unlikely to be the last.

How and when the next legal expenses underwriter will leave the market is inevitably hard to predict, but brokers owe it to themselves at least, to minimise the risk of finding themselves in a similar situation over the coming months.

Very few law firms will have the knowledge of insurance markets that most brokers do, so it may be hard for them to understand and calculate the risk. Brokers, on the other hand, should be much more adept at asking the right sort of questions, not just of their immediate provider but the ultimate underwriter too.

Who is this policy underwritten by? Where are they based? Who regulates them and what sort of scrutiny do they come under? Are they independently rated by a credible agency? How much experience do they have writing this sort of business?

Thankfully, it seems that Alpha’s departure and run-off will, like Elite’s before it, be orderly. The underwriter appears solvent and seems capable of meeting its obligations.

Next time, we may not be so lucky.

Underwriting Service Awards - accentuate the positive… but scrutinise the negative

It’s nice to win awards, especially when they’re the result of a market survey, but the feedback we get from such sources is always much more valuable than the accolades themselves.

We were really chuffed to pick up two Underwriting Service Awards towards the end of last year, for the Legal Expenses Team of the Year and Managing General Agents Team of the Year. You might think we take such gongs for granted, having collected a total of nine different prizes in the seven years that these awards have been running, but the voting process in the legal expenses category offers a rare chance to hear what brokers really think about ARAG.

Awards ceremonies can be fun. Even if you don’t come home with a prize, they offer the opportunity to catch up with friends from around the industry and even let your hair down a little. However, even winners can get some very clear, honest and valuable feedback from the market, if they take the time to look at the data and anonymous comments.

Digging deeper though, the anonymous comments from voting brokers offer some very genuine insight that is not easy to gain elsewhere.

First, it is gratifying that positive comments outnumbered the few negative ones by about 4 to 1, and that words like ‘service’, ‘flexibility’ and ‘relationship’ are cited time and again. But it is the few “weaknesses” to which we pay the most attention. Whether they appear to be minor niggles, requests to fill gaps in our product line-up or pointers about particular service areas, we know these are the things we need to work on, to maintain our reputation and stay at the very front of the market.

Awards surveys can only offer a snapshot, of course, and are far from our only source of feedback about the quality of our service. We have recently started the journey to Service Mark accreditation with the Institute of Customer Service, which will give us a broader, more rigorous and continual measure of  service quality, than we have ever had, but feedback in all its forms is vital.

Cycling to success

In 2017, we had the challenge of raising £5,000 for our charity of the year, FOCUS: the charitable fund of the Gloucestershire NHS oncology centre, and we are pleased to say that we achieved this target, and more!

Our enthusiastic staff have cycled to Düsseldorf, run around Bristol in Santa Claus costumes and baked to their hearts content, raising an incredible £12,000 for a range of charities! We are delighted with this achievement and would like to say a huge THANK YOU to all who donated and supported us along the way.

The Bristol to Düsseldorf charity bike ride was a great team effort, with 37 members of staff taking part and cycling 820 kilometres in 8 1/2 hours.

“It was fantastic to see so many people contributing so much time and raising so much money. What was really incredible is that besides the generous online donations, we received £300 from morning commuters just passing by – we must have looked rather amusing,” says Ian Screen, HR & Facilities Manager.

We were also delighted to receive the Payroll Giving Platinum award which recognises our commitment in fostering a culture of philanthropy and committed giving in the workplace, with over 20% of our staff regularly donating to charity through Payroll Giving.

“Our CSR policy expresses our commitment to being a socially responsible employer and enterprise,” declares Tony Buss, Managing Director. “We’re proud that so many of our employees support the various charity actions.”

Keep updated with our 2018 fundraising activities on our social media and visit our fundraising page here: https://uk.virginmoneygiving.com/ARAGLEI

Claims likely to rise following the abolition of employment tribunal fees

The abolition of Employment Tribunal Fees following UNISON’s successful Supreme Court appeal swept away a significant affordability barrier to individuals bringing claims against their employers or ex-employers.

There has been happy anticipation in the legal press that a surge of cases would emerge as access to justice was restored. Employment lawyers have fondly reminisced about a time before fees when individuals could more easily afford to bring claims. Commentators have speculated about the impact that the outcome of the UNISON case might have on the volume of future employment tribunal claims.  Will claims volumes increase to 2013 levels?

Rates have remained steady since ARAG entered the UK market in 2006 despite legal costs inflation. We should explain that over the last four years, any cost savings that it may have been assumed would have resulted from fewer employment tribunal applications have been tempered by:

·         a deflection of costs from tribunal representation to ACAS early conciliation. Early conciliation has been a significant factor in encouraging parties to settle disputes and reducing applications to tribunal. We cover legal costs to represent businesses throughout early conciliation. More than 92,000 complaints were notified for early conciliation in 2015/16 and in 48% of cases tribunal applications were avoided;

·         payment of employment tribunal fees either as part of an agreed settlement or as a consequence of losing a claim at tribunal; the Government’s undertaking to repay fees does not extend to employers (or their insurers) who were liable to pay them;

·         the effect of inflationary influences which have not been passed on to customers over time.    

Anecdotally, tribunals have reported an increase in the number of applications being received. We are hearing of long waits for hearings to be listed as applications back-up. The Employment Tribunals National User Group (England & Wales) noted, at its October 2017 meeting, that Regions were reporting a doubling in new claims since the UNISON decision. http://bit.ly/2D6RACE

Significant court closures, mergers and relocations and a shortage of employment tribunal judges, have contributed to the pressure felt by some tribunal centres. Additionally, the judgment in a particular case means that single claims may be brought where a multiple claim may have previously been brought; however the Government’s July to September 2017 tribunal statistics (published in December 2017) showed that single claim Employment Tribunal receipts are up by 64% over the previous quarter. http://bit.ly/2BoN01T This represents a sharp and immediate increase in risk for legal expenses insurers.

We are not going to mirror such an increase by raising premiums by the same extent (64%) or anything close to that; however, we will continue to monitor official tribunal statistics and our own claim volumes. Our Underwriting Team will carefully consider claims experience in light of previous employment claims and forecast the likely increase in claims to determine the future premium required.

Video guide to ARAG Legal Services website

We’ve created a new video to provide a short overview of our commercial section of the ARAG Legal Services website, to help business customers understand the ease and benefits of this valuable addition to the commercial LEI policy.



Our short,animated video provides a step-by-step guide to the website showing the simplicity and use of the website.

Our comprehensive, jargon free law guide, will help policyholders get to grips with business laws and regulations. Our extensive range of easy to customise documents will help them comply with the law and protect their business.

The top services include:

-employment agreements

-employee handbook

-debt collection letters

- Health & Safety compliance review

-job offer letter

-and more…

With ARAG Legal Services;your customers;will have access to a host of useful and legally binding documents at their fingertips and provide value to the policy... even if your customers never make a claim.

From 0-100

Recent publication of our annual results reveals much about the past and hints towards the future. To amplify his financial summary, MD Tony Buss was interviewed in a video on the ARAG YouTube channel to explain how a decade of growth has firmly underpinned the company’s ambition for the next 10 years.

Successive years of pre-tax profit showed another rise to £2.4 million in 2016, with particularly strong growth in BTE and underlying growth in ATE. Headline figures are also impressive: combined income (including reinsurance business generated back into ARAG SE in Germany) increased by 19 % from £26.5 million to £31.5 million, generating a £4.2 million profit. BTE was up nearly 20% overall with commercial and assistance business accounting for much of this increase.

It took the full ten years to go from 0-100 in terms of staff but selecting the right calibre of personnel, then investing in their training and development has been a core strength in the company’s controlled expansion.

Throughout 2016, there was the familiar combination of regulatory and legal changes to contend with. FCA initiatives and the add-on investigations were ever-present while the heritage of LASPO will continue to colour the picture for some years to come.

Despite the challenges, and partly because of them, there are exciting opportunities ahead for new products, and ARAG is running at full speed, ready to provide more creative, innovative and flexible solutions.

Now is the winter of our… actually quite contented, thank you very much.

As anyone in the insurance industry knows, claims service can be the hardest thing to get right but great service can often go unappreciated. Winters are inevitably tricky for home emergency claims, which come in waves on the back of bad weather, leaving customers distressed and anxious. So, we’ve been particularly pleased with some of the positive feedback our claims handlers have been getting, as winter arrives.

“Lovely”, “Thrilled” and “Fantastic” are not words often used in the insurance claims process, but all are among the many plaudits offered by ARAG Home Emergency policyholders as we helped them through some of the stressful events that the recent storms brought with them.   

“A lot of our Home Emergency business is in the High Net Worth sector,” comments Head of Sales, Andy Talbot “so, customer expectations are understandably high. But that makes feedback like this all the more gratifying.”

It’s no secret that the key to delivering any service is setting clear expectations and meeting or surpassing them. Customers are generally understanding, even at the worst of times, but they need to feel that someone has a plan and the expertise to put things right, as quickly as possible.

“We don’t try to pretend that we never fall short of our own, very high standards and there are always surprises that old properties and a British winter can throw at you,” continues Andy, “But we’re the first to put our hands up if something doesn’t go according to plan, and the claims teams are brilliant at keeping customers informed and helping them through what are always really stressful times.”

“Quality of service has always been one of the key things that ARAG has differentiated on. So, we really have to deliver on that. As we head into another winter, I’m really pleased that we’re living up to the high standards that partners and policyholders have come to expect of us.”

Why do you need High Net Worth cover?

Most High Net Worth clients are looking for that bit extra from their insurance.
At ARAG we offer comprehensive bespoke cover, higher limits of indemnity, backed by high quality legal advice and partner-led claims handling from solicitors who are experts in their field.

We provide enhanced family, home emergency and motor breakdown products, ensuring our cover is the perfect choice for your client’s needs.

 In summary, we offer:

• 24/7 HNW legal advice line
• flexible, tailored cover 
• pre-vetted, HNW preferred solicitors
• excellent customer service 
• account management
• award winning products & services

Why choose ARAG?

• Faster initial responses to claims notification and quicker initial assessment of claim 
  - 2 day service standard
• Claim handled by ARAG Senior Claims Handler
• Solicitor will be specialist in claim area
• Partner led claims handling at solicitors
• Enhanced service standards  with solicitor throughout claim

For more information please call us on 0117 307 2278.

Further discount applied

Last week’s announcement of a new process for setting the discount rate applied to serious injury compensation did not come as quite the surprise that the sudden hike in March did, and the proposals seem targeted on the middle ground between insurers and those representing severely injured accident victims. ARAG’s Product Development Manager Lesley Attu takes a closer look at the announcement.

Liz Truss sent the insurance industry into a tailspin a little over six months ago, when she announced a change to the ‘discount rate” from 2.5% to -0.75%. Share prices dropped, premiums were hiked and the insurers’ PR machines went into somewhat unseemly overdrive, demanding that the ‘crazy’ decision to ensure that people with catastrophic injuries should be adequately compensated, be urgently reviewed.

It may not have come about quite as quickly as some would have liked, but the MoJ’s proposals for a new mechanism to set the discount rate seem designed to strike a compromise. If Lord Chancellor David Liddington’s prediction that the new system would currently generate a rate between 0% and 1%, then it could fall very close to the mid-point between the -0.75% that so outraged the ABI and the 2.5% that it lobbied and fought so hard and for so long to preserve.

The MoJ says it will maintain a 100% compensation rule so that claimants should receive full compensation for the loss caused by the wrongful injury, and not any more, nor any less. It has accepted that the existing legislation governing how the rate is set is unrealistic and could result in awards that significantly overcompensate claimants.

The consequence, it claims, is that the NHS and other public sector bodies can be adversely affected and insurance premiums are inflated.

The MoJ has also acknowledged that injury victims are likely to be more risk averse than ordinary, prudent investors but that “low risk” rather than “very low risk” investments would represent a fairer benchmark. 

Primary legislation is necessary and, once it is passed, the discount rate will be set by the Lord Chancellor, who will take advice from a panel of independent experts. The panel will be chaired by the Government Actuary and will include four other members who will bring experience as an actuary, an investment manager, an economist and a consumer investments expert. HM Treasury will continue to be a statutory consultee for each review, which will take place every three years.

The panel will still be able to set different rates for different types of case, but the principles behind how the rate is set will be set out in the legislation.

So far, the Lord Chancellor’s news has been received more enthusiastically by the insurance industry (and its investors) than those representing injured victims, but only time will tell if the new rate setting mechanism will prove fairer or not.

Employment Tribunal fees will be scrapped

UNISON have won their Supreme Court challenge against the imposition of Employment Tribunal Fees. The Supreme Court website is about a week out of date and at the time of writing the full judgment is not listed however UNISON has issued a press release.

The introduction of fees, four years ago, is one factor that has contributed to rising claims costs for legal expenses insurers; however the potential costs savings to be realised following the scrapping of fees will be tempered by a potential increase in the volume of claims. UNISON’s victory will not be welcomed by businesses whose vulnerability to be claimed against will return.

We don’t yet know whether fees will be refunded automatically or whether, in the future, it will be possible to charge a lower fee.

UNISON makes a valid point when it says, “We’ll never know how many people missed out because they couldn’t afford the expense of fees. But at last this tax on justice has been lifted.”

ARAG policyholders will not be in the unknown pool of individuals who were deterred from pursing their employment dispute as their decision to take out Family Legal Solutions has given them protection against the unfair fees. Business policyholders who settle fees or are ordered to pay them have also been covered.     

ACAS’s 2016-17 report shows that around 1800 requests for early conciliation are received each week on average. Just below 50% of cases settle through ACAS early mediation and avoid being escalated to a hearing. ARAG policyholders have the reassurance of legal representation throughout early conciliation and beyond.

In relation to employment disputes, the fees have enabled the Government to save around one-third of the costs needed to run employment tribunals. Since introducing fees for employment claims other tribunal jurisdictions have introduced a fee system. For example, low fees of £100 for an application/ £200 for a hearing are payable for claimants seeking dispute resolution through the Property Chamber of the First Tier Tribunal. This level of fee seems much fairer and it’s possible the employment tribunals could adopt something similar.

Aside from charging fees in tribunals, did you know that last year HM Courts & Tribunal Services turned a profit of £100m through the imposition of “enhanced court fees”?  Enhanced court fees apply where court fees are set at a level that exceeds the state’s cost of running a case. This in effect turns courts into profit centres.  We deal with a number of landlord repossession claims and the last hike in fees increased court fees for landlords by 20%.  As tribunal fees have been judged to be unfair surely these enhanced fees are also unfair? 

ARAG’s vision is that all citizens should be able to afford to assert their legal rights and we exist to protect consumers, landlords and businesses against incurring heavy expenses to make or defend a claim. While the abolition of employment tribunal fees is welcome news for employees we will keep a close eye on the impact the decision might have on our business policyholders and we remain concerned at the high cost of bringing other types of claim.