/ Samantha Ramen, ABI / Ministry of Justice, cc'd to SW and ST and others / 13/5/11 / None
Ramen, Samantha [
'Steve Thomas'; Southwell, David; Steve Walker; Dalton, James
Dear Robert and Jo,
It was good to see you both yesterday morning and to talk through the items on our agenda.
It was encouraging to hear that we share the same views on the claimant lobby’s access to justice arguments and undesirable behaviours being driven by claims management companies. Indeed, these views are not only the insurance industry’s but those of all compensators that we have spoken to including various local authorities and, which Steve Walker confirmed in our meeting, the NHSLA.
We are continuing with our efforts to ensure that this message is not lost on members of the public and that it is more widely understood that these proposals can have a positive impact upon insurance premiums. As we discussed, the rising cost of motor insurance is in the forefront of everyone’s minds and we believe that Jackson’s proposals could benefit consumers without affecting the rights of genuine claimants.
As we mentioned, the missing piece of the puzzle, for us, is a ban on referral fees. Claims management companies use the current system to allow costs to be injected into the compensation system without adding any value to the claimant. It also drives undesirable behaviour and encourages claims that should not be brought. Insurers make no secret that they receive these fees and, as I mentioned, greater transparency is something which the industry can work towards but the ideal position, for the reasons above and that we discussed, would be to remove them altogether. The insurance industry would be very keen to engage in how this might work in practice.
Of equal importance is the issue of fixed fees and the hourly rate. We cannot support a system that can factor in up to 75% of the costs just to reflect a completely dis-proportionate acquisition cost. By reducing the fixed fee, you will bring some commercial reality into play and referral fees will be driven down by market forces as there will be less "fat" in the system.
We will contact our local authority contacts to discuss the QOCS drafting issue; this is, we understand, of great interest to all compensators so as to avoid a “have a go” culture. We would very much like to be involved in any discussions in this regard and we believe that we have much to contribute to the debate.
Thanks again for your time yesterday and do let me know if you have any further questions. As you mentioned yesterday Robert, James and I have a meeting with you scheduled for 24th May and we look forward to seeing you (and hopefully you too, Jo) then.
Kind regards,
Samantha
Samantha RamenPolicy Adviser, Compensation System
General Insurance and Health Directorate
T: 020 7216 7507
M: 07889 641702
Association of British Insurers
51 Gresham Street
London
EC2V 7HQ