PI firms “set to close” if reforms go through, finds survey, as defendant poll points to growing travel claims fraud

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By Legal Futures

21 December 2016


Anwar: we should not be fighting among ourselves

More than half of claimant personal injury (PI) law firms will be forced to shut down or look for other work if the government’s proposed reforms go through, a survey has found – and Lord Justice Jackson’s separate review of fixed recoverable costs could then put the rest out of business.

Marketing collective First4Lawyers, which conducted the “snap” survey of 71 firms, said the findings showed how the legal profession has to unite and mobilise now “if it is to save access to justice for injured people and the future of many law firms”.

Some 41% of firms said they would have to shut down the whole firm or the PI department if the small claims limit went up to £5,000 as proposed. A further 24% said they could adapt and survive – but only if the increase was limited to road traffic claims. The government’s stated preference is for it to apply to all PI claims.

Some 17% of firms saw opportunities to advise those with what would be small claims, while 11% predicted that they would take a hit, but were sufficiently diversified to survive it.

The survey did not show huge confidence among solicitors in those representing them. Asked which group they had the most confidence in to represent their interests to the Ministry of Justice, the Association of Personal Injury Lawyers and pressure group Access to Justice came top, but with only 30% each – just 8% were looking to the Law Society.

Qamar Anwar, managing director of First4Lawyers, said: “This is a moment of existential threat for many law firms. The government needs to understand that in its pursuit of a mythical £40 off motor insurance premiums, it is stripping the injured of their rights to justice and causing serious damage to thousands of hard-working professionals who are doing no more or less than upholding the law of the land.

“We will be responding to the consultation, but only half of the firms surveyed said they would too. Every claimant solicitor needs to make their voice heard to stop these deeply damaging reforms. And those representing them need to stop treading carefully and instead pull out all the stops to protect the rights of injured people – and of their own members.

“There are already signs of the kind of infighting that will ultimately be fatal to all – some solicitors are trying to pin all the blame on claims management companies (CMCs), but scapegoating will not achieve what they want and will instead play into the hands of the Association of British Insurers. Yes, the excesses of a handful of CMCs need curbing – and we fully back a total ban on cold calls and texts – but equally ethical, regulated CMCs provide a valuable service.

“We should not be fighting among ourselves – instead, we should train our focus on the unfair, misleading and profit-driven campaign run by the insurance industry that has got us to this position.”

The survey found mixed views on the likely outcome of Lord Justice Jackson’s review: 37% predicted that it would lead to fixed recoverable costs (FRCs) on the multi-track – although they were split on whether the upper limit would be claims worth £100,000 or £250,000 – while 23% expected FRCs to be limited to the fast-track. One in seven thought the judge would realise the task was much more difficult than expected and that change would be limited.

If there is a significant extension of FRCs, a third of respondents said that, on top of the government reforms, it would be the death knell for many PI firms. Another 37% said that FRCs would be fine if set at a reasonable level – but they had no confidence this would happen. Just 3% were optimists and said they would be.

Qamar Anwar added: “Whether or not the PI reforms were co-ordinated with Lord Justice Jackson’s review, the combination comes across as a concerted attack on claimant lawyers. And all the while, defendant insurers are laughing and enjoying bumper profits.”

Meanwhile, British Cycling has expressed disappointment that the consultation makes “not a single mention of the impact that these reforms will have on non-motorised road users – including people on bikes, and it is clear that the proposals put forward would significantly reduce cyclists’ access to justice”.

It said raising the small claims limit for all personal injury claims “goes far beyond the main aim of cracking down on whiplash claims”, with around 70% of claims made by cyclists worth less than £5,000.

Martin Key, British Cycling’s campaigns manager, said that this would make it “very difficult” for cyclists to get legal representation “and therefore to be adequately compensated for their injuries” – he also predicted it would increase the amount of cold calling by CMCs.

He continued: “The message that this sends to cyclists is one which conflicts with existing government policy. Increasing levels of cycling is a proven way to reduce congestion, improve the environment and reduce the burden on the NHS – the government needs to be encouraging more people to cycle, not putting extra obstacles in the way.”

British Cycling also objected to the consultation process running over the Christmas period but said it would submit a response which would urge the Ministry of Justice to re-think the proposals.

Finally, a survey by leading defendant insurance law firm BLM has found that “rogue” claims management companies (CMCs) are urging holiday makers to put in speculative claims against operators and hotels.

BLM said commissioned YouGov to survey 2,000 consumers on their attitudes to sickness claims on all-inclusive holidays, after the law firm saw claims against its in travel customers soar over the past 12 months.

Some 46% of those questioned thought it would be acceptable to make a claim for food poisoning even if they were not sure their illness was the fault of the hotel, “a belief that has helped create a thriving fraud culture”, according to BLM.

Sarah Hill, partner and head of fraud at BLM, said: “It is not exaggerating to call this situation an epidemic. CMCs have identified this as fertile ground and there is a deep pool of potential claimants up for grabs. There needs to be some level of consumer education, as almost half of those surveyed think this practice is acceptable. In reality, it is against the law and is pushing up holiday prices.”

BLM said 5% of people have received an unsolicited call about making a claim against a holiday company, and 5% of all-inclusive holiday goers have been approached to make a claim during a holiday.

“The CMCs are also targeting those that are likely to be more vulnerable to committing fraud, with 15% of all-inclusive holiday goers with two or more children in the household having been approached while abroad on an all-inclusive package holiday – some with the potential to pay for next year’s holiday on offer,” Ms Hill said

“Payouts typically range between £500 and £2,000, and many people are seeing this as a quick and easy way to make some money, with CMCs assuring their targets that they are entitled to make these claims.

“The industry needs to come together with government to develop a solution to this issue. It needs addressing in the same way whiplash claims were, with regulation that drives rogue CMCs out of the market. If left unchecked, this could threaten the future of the travel industry.”



One Response to “PI firms “set to close” if reforms go through, finds survey, as defendant poll points to growing travel claims fraud”

  1. Whilst the motivation behind the proposed changes is at a minimum questionable, hopefully common sense will prevail, the real dangers of using a sledge hammer to crack a nut are avoided and something more proportionate emerges. There has been a steady and substantially controlled consolidation of the market since the banking crisis and in particular since LASPO. An impact on the best interests of existing clients will no doubt be an unintended consequence if the market is put into further turmoil. For those firms that do decide enough is enough much has been written on strategically exiting the sector with client’s interests central to the process and can be found in the Legal Futures archives. Central to all of that is seeking external advice around what is likely to be a one off event for the exiting firm in circumstances not previously experienced.

  2. David Johnstone on December 23rd, 2016 at 10:28 am

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