Claims volumes: Two months on from J-Day
Here we are now two months on from implementation of some of the main planks of the Jackson Reforms. It’s timely to look at how the Reforms are affecting claims frequencies and to look at current and future trends.
Claims notified to CRU
The latest batch of Government statistics have been released showing the numbers of claims notified to the CRU over the previous 12 months up to the end of March 2013. The reduction in the number of motor claims by 9.5% to around 750,000 per year had previously been reported. Other types of claims show increases, with a spectacular rise of 57% in PL claims up to 165,000 per year, and with EL claims showing a 4% increase up to 91,000 per year.
These statistics probably pre-date the implementation of Jackson as they concern the period concluding at the end of March, and because they are notifications to the CRU rather than to insurers. For the large volumes of new claims taken on by claimant lawyers before 1 April to have been included in these stats, those claims would have to have had letters of claim sent which reached insurers and then for those new claims to have been notified to the CRU, all before 31 March.
Looking forward, what are the current signs as to what the CRU stats of new claims will look like in 12 months’ time?
Let's look firstly as what retainers claimants are signing up with lawyers onto nowadays as these can of course affect the question of whether as many claimants will still want to bring claims.
Are claimants going to be willing to pay success fees and take out ATE policies?
APIL are reported as saying that for its members to survive, they are expecting to charge the maximum success fees permitted. This will involve claimants losing 25% of PSLA and special damages. While it is still early days it is reported anecdotally however that on the basis of new retainers entered into over the last two months, claimants in fact are willing to accept the loss of part of their damages to pay their lawyers' success fees, and still want to bring their claims nevertheless.
These discussions with potential new claimants are also being had as to whether they are willing to fund the cost of an ATE policy against their residual costs risks. As with any question of choice of this type, we can see that some claimants will decide to take out ATE at their own cost, others will choose not to. The cost of the available policies will be relevant, as will the perception of risk seen by both the client and the lawyer. APIL's view is that because the Part 36 costs risk is likely to be seen by claimants as a significant one, they will want to insure through an ATE policy, and that APIL members will probably advise that ATE is taken out. This is relevant to insurers because it should be remembered that it is only if the claimant elects to go uninsured for adverse costs orders (and does not have BTE cover) that he is fully exposed to potentially losing all of his damages if he decides to reject an insurer's Part 36 offer. What had been seen as an important new dynamic in favour of insurers on their Part 36 offers will be watered down if there is a widespread move towards claimants taking out ATE at their own cost if modestly priced premiums remain available.
So from the retainer aspect, there are no clear signs here of an expectation of lower numbers of claims in the future. The advertising of claimants' solicitors is changing from "Keep 100% of your damages" back to "No win no fee".
Changes in the claimant market place and the effect on claims volumes
The current hiatus in the claimant market place, as well as the need for steps to be taken before specific dates to avoid parts of the Jackson Reforms, is likely to have some effect on claims numbers in the short term as claimant lawyers throw resource at issues where they have much to lose otherwise, whether it was signing up claimants onto CFAs with recoverable success fees before 1 April, or lodging claims to the current portal before 30 April. The Solicitors Regulation Authority are still supervising more than 50 law firms at the risk of financial collapse where it may be necessary for the SRA to intervene in those businesses. Many of these firms will be ones involved in claimant personal injury.
The move towards larger entities able to handle claimant personal injury cases more efficiently is ongoing. At the moment, it seems that the prime movers in leading these changes are law firms rather than claims management companies.
There continues to be a high level of interest in the UK by Australian law firms. Slater & Gordon, who have already of course acquired Russell Jones & Walker, have targeted the UK for further growth, and have recently publicised plans to acquire Simpson Millar, Goodmans Law and the claimant personal injury part of Taylor Vinters. Shine Law, the third largest PI firm in Australia, have now stated their intention to expand into the UK, and say that talks are ongoing with various firms over here.
There is also an interest in expansion through purchasing of claims. Irwin Mitchell say that they are contacting firms with a lesser claimant personal injury involvement than themselves, with an interest in negotiating to buy books of business in order to expand their market share. MC Vanguard Corporate Finance say that they too are looking to acquire books of the same type of work from distressed businesses.
It was also announced on Friday that BGL Group, owners of comparethemarket.com, had received its ABS licence to acquire Minster Law, a mainly claimant personal injury £107m business.
In conclusion, two months on from J-Day, it is too early to say for sure what the future of injury claims will look like in another 12 months, and the claims volumes that can be expected. The important uncertainty regarding the potential rise in the small claims track is not now going to be tackled by Government until the autumn, at the earliest. In the short term, we see volatility in claims numbers over the next year or so, as other parts of the Reforms come online and as claimant activity is diverted to trying to take advantage of the current regime before particular changes are introduced. There will also be unpredictability of notifications caused by the changes involved in the move to larger, leaner and more efficient claimant operations. We should not be surprised if there are a number of spikes in claims notifications, between periods of lower numbers of notifications, along the way during this time of greater volatility. Current signs are that claimants still wish to bring their claims under the new regimes, and that there are claimant lawyers (some different from those who have previously submitted these claims who see the opportunity for profitable work).
For further information please contact Simon Denyer, Partner on 0161 604 1551 or email email@example.com
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.