Predicting changes in claims volumes and latest portal data
16 June 2014
Friday afternoon saw the release of the portal data for last month. As we look in these changing times for signs of future claims trends, what can be taken from this release of data as sign posts to the future?
Motor claims and overall claims volumes
We continue to use the RTA stats as the most reliable data currently released from a central source as providing pointers not only of motor trends, but of overall claims trends because of the maturity of data. On that basis, the figure for new RTA claims submitted to the portal this month is interesting. It’s 67,000, or in other words a 3,000 increase from April. And this time the increase can’t be explained because of a need to tweak figures for a shorter working month, as in both May and the previous month of April, there were the same number of working days albeit a lower level than for most months. Each of those two months included two Bank Holidays so reducing the number of working days to 20. In other words, we can do a like-for-like comparison between April and May, and result is that there is an increase of 3,000 claims.
As to where this sits in the broader picture, there are two worthwhile comparisons, as we look to answer the most important question of whether RTA portal volumes and new claims numbers generally will reach pre Jackson/LASPO reforms levels. As to the first comparison, looking at the average over a 12 month period before the reforms started to affect the number of new CNFs being lodged, that average was 67,500. The new figure is currently very close to that. As to the second comparison, with claims volumes since the last part of the reforms have come in, we had started to see a monthly average figure for new CNFs arising of between 66,000 and 69,000. We are back to being within that range too. So there is probably something in the fact that a comparison between this month’s raised figure with both of those barometers holds water.
As we reach towards the middle of 2014, are we now able to say that we are starting to see a new norm for RTA CNFs rather close to the old one pre the reforms? Of course £10-25k RTA claims are now included in the stats and were not pre reforms, but while there is no data giving a breakdown as to the different claims values, insurers will know themselves that the higher bracket of claims within the portal is limited to a very small percentage of portal claims. So maybe we are moving back towards pre reforms levels, and the increase of 3,000 this month is an indication of that.
Factors affecting new motor claims
We like to compare apples with apples where we can, or if we can’t at least to know if we’ve got some pears in the fruit basket as well. To be a bit more scientific in looking to anticipation of future trends, we need to recognise that the number of new RTA CNFs is affected by various factors.
Firstly, there are those associated with vehicle and accident numbers themselves. The key data here released by the Department for Transport is the number of vehicles on the road, the number of miles travelled, the number of accidents, and the number of claimants from each accident. The first graph below shows some of this data where this is available to date. For Q1 of 2014 the DfT has already published vehicle numbers and vehicle miles, but accident numbers are released less quickly. DfT data shows that Q1 of 2014 showed an increase of 4.1% in vehicle miles travelled over the same quarter of 2013, as the economy picks up. This is the highest number of miles travelled since a peak in 2008.
Secondly, we need to recognise the time lag between the accident and the CNF being lodged, connected as it is with the type of claimant law firm and how it receives its instructions. Often a CNF will be lodged within a month or two of the accident, but on the other hand if claims farming is involved as it often is, the period can be much longer where claimant operations take advantage of the 3 year limitation period within which to acquire cases. If we were looking for an average time lag to turn an increase in vehicle miles with a corresponding increase in the number of accidents, into an increase in the number of CNFs, then maybe a 3 months average period would at least be a starting point. This is the assumption we make in the first graph.
Thirdly, the number of new CNFs is affected by the response times from claimant operations to the reforms, and the bedding in of changes to claimant business models, the settling down of restructuring and recruitment changes, the establishment and successful use of new systems and technologies, and all of the same in relation to new marketing functions. These changes are clearly on-going at varying speeds across claimant businesses, and while the jury must remain out at present, the additional business expertise available to ABS businesses may well mean that they become better at generating new claims in the future.
Predicting trends based on DfT data
The data from the Department for Transport allied to the average time lag before a CNF is lodged could have an impact over the next quarter’s portal stats, this first graph explains why. The bars on this graph show the number of new claims to the RTA portal – blue bars for pre the reforms, red for the volatile period while the reforms were coming on stream, and yellow for the period since. Superimposed on top are the lines representing data from the Department for Transport, the top line (red) for the number of vehicle miles, the second line of purple for the number of accidents which increases broadly in line with the number of accidents (though the data is not as up to date as for vehicle miles), and the lowest line (blue) showing the fairly static number of licensed vehicles on the road. The DfT data represented by lines on the first graph incorporates the factor that that data will on average affect claims numbers 3 months or so into the future by showing that DfT data not against the date from which it originates, but alongside the date when we expect it to start having effect on the number of new claims. As the economy continues to improve so in turn continuing to drive up the number of miles travelled, along with an accompanying rise in the number of accidents, set alongside an average time lag of 3 months before submission of CNFs (while recognising that at least for some claimant businesses there will be more than that 3 month time lag), this would suggest that there is here a pointer towards an expected increase in RTA CNFs in the quarter ahead.
RTA court packs
This last month saw the highest ever level of court packs at 2,290. This is no less than a 14% increase over the previous highest month in March last year. The on-going trend of claimants or their lawyers (both having a financial interest in the level of settlement) being keener to push for higher settlements is picking up pace, though this month the average PSLA figure offered was static at £2,558.
We look at the latest data here to identify early trends where those portals have now been open for 10 months.
As to volumes, EL accident claims are up to 3,722 for the month, the highest to date, and we may be seeing the number of new accident claims consolidating at between 3,500 and 4,000 per month. In EL disease, the number of new claims this time is 1,377, a slight fall from last month’s figure. Unlike with the accident portals, there is of course always the opportunity for abuse as claimant lawyers can involve a second defendant to avoid having to use the portal. It may be that we are starting to see an average new monthly number of disease claims at around 1,400 per month. In the case of PL, there were 5,930 new claims last month, marginally higher than March, and we may be settling into a position where there are around 6,000 new PL claims per month. If these projections are correct, this would lead us to an overall average of around 11,000 new casualty portal claims per month, around one sixth of the number of RTA claims.
Casualty quantum and settlements
As to volumes of casualty settlements, these remain limited. There are to date 1,082 PL settlements representing 2.7% of CNFs lodged, 1,035 EL accident settlements (4.2% of CNFs submitted), and only 138 EL disease settlements amounting to 1.6% of CNFs to date. We are sure that the EL disease settlement percentage will always remain the lowest of the three because of suitability issues regarding the process.
PSLA figures offered are also up across the casualty portals, in part due to the same factors as in relation to motor claims. In EL accident and for PL the monthly figures are both up 10% to £2,969 and to £2,941 respectively, while for EL disease the level is up 4% to £5,003.
Casualty retention rates
There is a deteriorating position on retention rates as these graphs make clear. The overall casualty retention rate is now under 30% for the first time as shown on the second graph, as opposed to the RTA retention rate of around 50%. The EL accident rate has dropped to under 40%, PL remains between 20 and 30%, while the casualty average is brought down by EL disease which is now under 20% for the first time as shown on the third graph. Not good statistics to show that the portal is a suitable process for these types of claim. In truth, the jury should remain out on questions such as these, as we continue to expect EL accident and PL retention rates to stabilise with time, but the casualty average will always be pulled down by EL disease in view of the well-known issues of using the portal successfully to handle that sort of claim.
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.