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7 April 2011

Insurers are behind clampdown on ‘no win no fee’ services

Ian Comer, director of comercrawley, says that intensive lobbying by insurance companies is a major factor in the government’s plans to impose restrictions on ‘no win no fee’ services.

In his budget statement, the Chancellor of the Exchequer George Osborne announced restrictions to be imposed on ‘no win no fee’ services which would stop claim companies getting a fee from the defendant or their insurance company.

The insurance giant Aviva welcomed the decision, saying that 40% of every motor insurance policy is spent on compensation claims.

But there are concerns that this would deter genuine claimants from pressing ahead with a legitimate claim if they have to fund the legal process.

The Prime Minister David Cameron has previously expressed his concern that there is a damaging personal injury compensation culture within the UK, and that unscrupulous personal injury solicitors have been only too willing to jump at the chance of taking on a claim on the slightest pretext.

Ian comer, director of comercrawley, said: “The government removed legal aid for personal injury work in the mid 90s, allowing solicitors to take these cases under a ‘no win no fee’ arrangement. They effectively wanted to save money.

“In return for taking that risk solicitors were allowed to charge a success fee - a bonus on their basic costs - to compensate for the risk of losing and not getting paid.

“Initially the success fee was payable by the client out of their damages but this was capped at 25% so the client was always guaranteed 75% of their compensation, which was highly acceptable to everyone.

“Then, for some bizarre reason, the government decided that the success fee would be paid by the defendant’s insurer. So when the defendant lost, the insurer would pay compensation, legal costs and then the other side’s success fee as well.

“Over the past 10 years or so, at comercrawley we have operated all our claims on ‘no win no fee’ and do not charge clients a penny, win or lose. We fund all the ongoing expenses of running clients’ claims including the cost of medical reports, other experts’ fees, police reports, the cost of accessing medical records etc.

“Firms like comercrawley have lifted the burden of funding personal injury litigation off the State but now insurers are saying they don’t like it. They say there is a litigation culture but in fact the number of claims made is not increasing.

“If the government’s proposal is that the success fee should once again be paid by the client out of damages - subject to the same safeguards as before - then I don't see too much of a problem.

“I believe that this is just the thin end of the wedge. Over the last seven years insurers and the government have forced through changes which mean that the vast majority of claims are now dealt with on fixed costs - and we have seen a significant reduction on these costs during this period. For example, seven years ago a straightforward road accident claim valued at £5,000 would attract fixed costs of £1,800 - now such a claim would attract costs of just £1,200.

“I believe that the government and  insurers’ game plan is to drive solicitors out of the market for modest value claims. There is already a new electronic portal system which covers road traffic accident claims up to £10k, which has been designed for use by the public - and I am sure this is the forerunner of excluding costs altogether so the public have to pursue their own claims, and we all know what will happen then.

“The insurers will bank on members of the public getting worn down by the process of delay and prevarication and I am sure the vast majority just won't bother if they have to take on the insurers on their own.”

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