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Legal reform may reduce insurance costs for all

September 18, 2013

According to recent statistics produced by the House of Commons and the Health & Safety Executive, you are more likely to be involved in a road accident or work related injury if you live or work in the countryside when compared to urban areas. Furthermore, if you own a business or have land you are more likely to find yourself defending a personal injury claim. These factors, combined with a growing UK compensation culture, have unfortunately led to a continued rise in the cost of rural claims.

This year the Ministry of Justice (MoJ) implemented the largest overhaul of the legal framework in England and Wales in over a decade. The changes, which affect both private individuals and businesses, are designed to speed up the settlement of personal injury claims and to reduce fees. These reforms aim to create an environment where the overall claim costs should be less, allowing insurance companies can pass on savings to their clients through lower premiums.

The most relevant parts of the legislation are as follows:

No win no fee agreements – Previously, solicitors could take on cases under conditional fee agreements (CFAs).  If a claim was successful, the solicitor would charge a success fee on top of their base costs and this would have to be met by the defendant. Under the new reforms, the claimant will now have to pay this fee from their own award (capped at a percentage of that award). To allow for this awards have been increased by 10% but the overall cost of a claim should reduce.

Banning referral fees – It is now an offence to pay or receive referral fees in personal injury cases.   This ban is intended to combat the compensation culture where claims management companies have encouraged people to claim for minor or even fictitious injuries so that they can claim a fee.

Extension of the MoJ portal – To reduce administration costs, in April 2010 the government launched an online portal to process motor personal injury claims in a fast and efficient way using MoJ authorised legal representatives. Due to its success the upper financial limit of this system has now been increased to £25,000 and it has been extended to Public and Employers’ Liability personal injury claims.

Timescales for decisions – Insurers now have just 15 days for Motor, 30 days for Employers’ Liability cases and 40 days for Public Liability claims from notification by third parties to make a decision on liability. Significantly reduced from the current timescale of 90 days turn around. Given the much shorter timescales to acknowledge and investigate claims and make liability decisions, speed will be of the essence. The strict deadlines to admit or dispute liability will mean that policyholders will need to quickly supply insurers with all relevant information relating to an incident.

If the timescales are breached and a claim moves outside the portal process it is highly likely that costs will increase.  If insurers believe that delays by their policyholder led to the breach then they may look to recover any additional costs from the policyholder. To avoid this policyholders should keep all documents in a safe place where it can be accessed and quickly notify insurers of any incidents.

For more information about how these reforms may affect your insurance, or to join the thousands of members who benefit from excellent service, enhanced cover and competitive prices, contact CLA Insurance on 01234 311 211 or email

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