Fraud - December 2009
Minstry of Justice Claims Reform
Stuart Smith considers the forthcoming Ministry of Justice
Reforms of the Road Traffic Accident Claims process, whether they
will encourage fraudulent claims and the factors Insurers should
bear in mind when looking at their response.
The latest publication by the MOJ regards the
Road Traffic Accident claims reforms was published in October 2009
– click on the following to see the full paper.
http://www.justice.gov.uk/publications/docs/personal-injury-claims-road.pdf
The Process
The new process, which is due to be
implemented for road traffic accidents occurring on or after 6th
April 2010, is designed to streamline low value claims for personal
injury (£1,000 - £10,000) and provide fixed costs to claimants
solicitors at various stages.
The new process will involve 3 stages as
follows:-
Stage 1 – Providing early notification of
claims to defendants and insurers
This will involve full details of a particular
claim being presented to the insurer. The insurer will have 15
working days in which to respond with a decision on liability. For
MIB claims (under the Uninsured Drivers’ Agreement) this is
extended to 30 days. In the event liability is conceded then the
case will proceed to Stage 2.
Fixed costs of £400 are payable at this point
(subject to a 12.5% Success Fee which is payable at the end of
stage 2 where the claim is successful and where a conditional fee
agreement is in place)
Stage 2 – Medical Evidence, offers to settle
and negotiation
Once the defendant’s insurer admits liability
the claimant solicitor will take steps to obtain a medical report.
There is no fixed timetable within which the claimant solicitor has
to obtain the report. Once a report is obtained this is checked for
accuracy. Within 15 working days of the report being confirmed as
factually correct, the claimant solicitor will complete a stage 2
settlement pack. This will be submitted electronically to the
insurer to consider. The insurer will have 15 working days in which
to consider the report and either accept the offer or make a
counter offer to settle the claim. If the offer is not accepted or
a counter offer is not made within 15 days the matter will fall out
of the process. Where a counter offer is made there will be a
further 20 working days for consideration and negotiation.
Where agreement on quantum is not reached by
the end of the negotiation period the matter will proceed to Stage
3.
The defendant’s insurer (where settlement
cannot be agreed) will pay by way of an interim payment the full
amount of their offer (minus CRU liability) to the claimant
together with Stage 2 fixed recoverable costs of £800.
Where the case settles at stage 2, fixed
recoverable costs of £800 will apply (plus 12.5% success fee and
where a conditional fee agreement is in place).
Stage 3 – Where Quantum cannot be agreed
The claimant will send a stage 3 settlement
pack detailing the offers of the parties to the insurer.
After, 10 working days from the date the
settlement pack has been sent to the insurer, the claimant’s
solicitor may make an application to the Court for damages to be
determined. If the claimant solicitor fails to send a stage 3
settlement pack within the prescribed timescales the insurer may
take steps to do so and then make an application to the court for
quantum to be determined. The settlement pack will set out both
parties’ final offer and lodged in a sealed envelope only to be
seen after the Judge has made his decision. There will be a paper
hearing unless either party requests an oral hearing.
Assuming the claimant is successful in beating
any offers made there will be further costs payable by the insurer
of £250 for paper hearings and £500 for oral hearings (plus success
fee of 100%). Defendants costs for Stage 3 will be identical.
The Advantages
The proposals aim to provide a very quick way
of presenting and settling claims. There is scope given the tight
time lines for fraudulent claims not being detected. However, with
any new process we must build in safeguards for fraud detection and
evaluation. The reforms have borne in mind the threat of fraud to
insurers and there are a number of features that will help insurers
detect fraudulent claims. Of particular interest are:-
Full particulars of the claim, together with
complete personal details of the claimant will be mandatory at the
outset giving Insurers a full picture, rather than the present
common occurrence of a ‘drip feed’ of information.
Details of all passengers in the vehicle will
be required at the outset.
It is requested that the claimants’ solicitors
disclose the source of their work. Although this is not a mandatory
requirement. This will help identify those accident management
companies that are under suspicion. Failure to answer this
question may give insurers cause for suspicion in any
event. Much depends on how co-operative the claimant community is
with this provision.
During Stage 2 the medical report is to be
checked for factual accuracy before it is sent to the defendant.
Where an inaccuracy in the report is noted and the report amended
the defendant is to be informed as to the reason for the delay.
There will be no further opportunity for the claimant to challenge
the factual accuracy of the medical report once it has been
disclosed giving certainty to insurers who at present often face
unconvincing explanations of inconsistencies long after the medical
report has been submitted.
Suspicious Claims and leaving the
process
Whilst the process will provide for swift
resolution of claims and provision of comprehensive and accurate
information, there will be many cases where a suspicion of fraud
arises. Accordingly insurers should consider the ways in which a
claim can leave the process.
At paragraph 3.2.15 it states that “where
fraud is uncovered at any point during the process the claim will
leave the process. The insurer will notify the claimant solicitor
that the claim will not continue in the process due to an
allegation of fraud.”
However, in many cases there will not be
sufficient evidence with which to justify an allegation of fraud
and accordingly Insurers should be aware of other ways in which a
claim may leave the process and ensure that these are utilised
effectively. The other ways of leaving the process are:-
Liability is not admitted in the first stage
(or an allegation of contributory negligence is raised)
A denial of causation during Stage 2.
By neither accepting the claimants offer to
settle or making a counter offer during Stage 2.
Based on the proposals to date effective use
of these provisions may help Insurers in avoiding payment where
there is a reasonable suspicion of fraud but no conclusive evidence
with which to justify a formal allegation.
The future
The new reforms look set to provide a simple
and straightforward way of dealing with honest claims arising out
of genuine accidents.
However, for those attempting to defraud
insurers the proposals provide a quicker and easier way of
processing the claims before suspicion arises. Accordingly insurers
should review their fraud detection procedures to ensure where
possible suspect claims are identified at the outset and handled
proactively from an early stage.
There is a clear danger that Insurers will see
an increase in the numbers of and cost of fraudulent claims.
Accordingly it is ever more important that Insurers have an
effective deterrent policy so that those involved in the
presentation of fraudulent claims are effectively brought to
book.
If insurers respond by maintaining effective
detection, case handling and deterrent policies then fraudsters
should remain on the back foot.
Weightmans Consultancy
We have a team dedicated to dealing with the
motor claims handling regime under the proposed MOJ reforms. These
reforms challenge existing processes and the way in which we
analyse and benchmark management information. We at Weightmans are
fully alive to the challenges but also the solutions that need to
be put in place to ensure compliance.
We can assist you in overcoming these
challenges and ensure you are MOJ compliant. Our services range
from providing advice on your processes, fraud to tracking
behaviours. We will provide a solution which ensures that you
maximise the potential benefits afforded by these reforms.
Insurers and compensators who require
advice regards the new reforms and their response to them should
contact Stuart Smith -Head of Fraud on 0151 242 7948 or stuart.smith@weightmans.com
or Bavita Rai - Operations Manager on 0121 200 3499 bavita.rai@weightmans.com