Government eyes stronger powers to discipline solicitors as part of insurance fraud crackdown

Philip: civil standard is right way forward

Philip: civil standard is right way forward

The government yesterday accepted recommendations for stronger fining powers for the Solicitors Regulation Authority (SRA), a lower burden of proof before the Solicitors Disciplinary Tribunal (SDT), and the need to introduce further measures to discourage ‘late’ personal injury claims, in the next stage of its crackdown on fraudulent behaviour.

Treasury minister Harriett Baldwin said yesterday that the government accepted all of the recommendations addressed to it in the report of the Insurance Fraud Taskforce, published in January.

“We will set out in due course how we propose to implement them,” she said in a written statement to Parliament.

“However, there needs to be a concerted effort by all those involved in the insurance process to tackle this serious problem, which is estimated to cost policyholders up to £50 each per year, and the country more than £3bn.

“We therefore expect organisations tasked with taking forward recommendations to do so with urgency. The government will do what it can to assist and, in order to make sure that all of the recommendations are actively pursued, we will seek an update on progress later in the year.”

Ms Baldwin said the government was also “pleased” that the report’s recommendations supported the current whiplash reform programme.

The report, which was commissioned jointly by the Treasury and Ministry of Justice, was received with scepticism by claimant lawyers because of the heavy insurer bias in the taskforce’s membership.

Among the recommendations made to government were that it should considering strengthening the fining powers of the SRA for fraudulent or corrupt activity – it can currently fine up to £2,000 without the need to refer a case to the SDT – and that it should consider reviewing the standard of proof used in cases before the tribunal.

The issue of the standard of proof has been bubbling away for some time now, with the SRA adopting the civil standard but the SDT maintaining that the criminal standard is right for its work.

Paul Philip, SRA chief executive, said: “We welcome the announcement that the government has accepted the taskforce’s recommendations. In particular, I am pleased that the government supports the call to look at the SDT adopting the civil standard of proof. We agree that is the right way forward. Alongside that, reviewing our fining powers would make the system more efficient and effective.

“Insurance fraud costs the public money. We have made some good progress on tackling financial crime. But we know we have more to do and are taking steps to act on the taskforce’s report. As part of that, we are already working with the Insurance Fraud Bureau (IFB) to bolster efforts to improve evidence-sharing.”

The report said that the government should review how fraudulent late claims could be discouraged through changes to court, cost and evidence rules, considering options including:

  • Recent claims (eg, within six months) proceeding as normal through the fast track, but older claims being dealt with in the small claims track;
  • Reducing recoverable costs by 50% if a minor personal injury claim is notified six months after the accident
  • Introducing a system of predictable damages for soft tissue injuries; and
  • Introducing a rebuttable evidential presumption that no injury was suffered where claims are lodged after a specified period of time has elapsed since the alleged accident.

The taskforce also called on the government to consult on introducing a mandatory requirement for referral sources to be included on claims notification forms, and that claims should only proceed where the forms are complete.

The taskforce urged the SRA directly to take a “tougher approach to combatting fraud”, including by considering whether solicitors should undertake client identification checks in cases other than just those where they handle client money.

Recommendations directed at the Association of British Insurers (ABI) included discouraging the “inappropriate use of pre-medical offers”, while it said the insurance industry as a whole “should consider following the established good practice of some insurers in defending court proceedings where they believe the claim is fraudulent”.

Insurers should share data directly with the SRA where they suspect fraud or breaches of the referral fee ban, the taskforce said.

The recommendations addressed what has become another hot topic: insurers contacting claimants directly to check that their legal representatives are acting under instruction.

They said the ABI and IFB should produce guidance on what direct forms of contact were acceptable, while claimant and defendant representatives should produce a standard letter, in conjunction with the SRA and IFB, for insurers to send to claimants to verify whether they have instructed a firm to represent them.

Tom Jones, head of policy at leading claimant firm Thompsons, said: “Well, blow me down with a feather – the government accepts everything the insurance-dominated taskforce tells them…

“The recommendations are entirely unsubstantiated. The ‘fraud’ figures they quote are not independently verified and their sources are not transparently reported…

“Insurance companies are massaging the numbers to suit their own ends. Profits and dividends would not continue to rise if fraud was as prevalent as insurers claim. The taskforce report is nothing more than pro-insurance propaganda that supports the industry’s financial motives and the government has bought it hook line and sinker.”

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