31 October 2012

Clayden: level of fixed costs will determine insurers’ appetite for ABSs

Insurers will be forced to consider alternative business structures (ABSs) if the government is not sufficiently “bold” in reducing the level of legal fees for RTA portal cases, a leading defendant lawyer has warned.

Dominic Clayden, Aviva’s UK general insurance claims director and an outspoken critic of the current regime for dealing with small personal injury claims, said the failure to grasp the issue would spark a return to the costs war of the last decade.

The government is committed to reducing the basic £1,200 fee for portal cases, particularly in the wake of the referral fee ban, but has not yet indicated how far it will go. The Ministry of Justice revealed last week that representations from insurers averaged out at a call to cut the fee by two-thirds to £400, a figure claimant lawyers say is unsustainable.

In a recent interview with Post magazine, Mr Clayden said the success of the Jackson and other civil justice reforms “depends to a large degree on how bold the government is in reducing the legal fees to what it reasonably costs a solicitor to process a claim and make a profit. Referral fees are the scourge and they have to be taken out of the system…

“If the government isn’t bold enough, there will simply be a move to all and sundry owning a law firm. The problem won’t be solved and we’ll just have another variant of the costs war.”

Mr Clayden said he did not want to buy a law firm: “I hope the number is low enough that it doesn’t make sense. But if you create a commercial advantage, the whole market will move because it has to.”

He said the government understood the issue, but there was no sign as to which way it will go with setting the fee – he does not now expect it until the new year. “One of the difficulties we all face is the need to change operational and IT processes to accommodate the changes,” he said.

“The less notice we get, the more painful it is going to be. It’s exactly the same for lawyers. Despite what they may think, I don’t want to see any lawyers going out of business. I just believe there is too much legal involvement and we need to help them manage their businesses into a different place.”

 

By Legal Futures

Tags: ABS, Alternative business structures, RTA portal

One Response to “Clayden: level of fixed costs will determine insurers’ appetite for ABSs”

1. Lets hope this does not lead to a ‘costs war’ which in the end only ends up hurting the client and devaluing one of the main principles behind the recent reforms.

Kerry Quinn on November 1st, 2012 at 2:19 pm