Blog: Whiplash reforms will present operational challenges for insurers, warns a claimant lawyer

The delay in the proposed implementation of the whiplash claims reforms until April 2020 was generally welcomed by the insurance industry for the pragmatic reason of wishing to get it right, perhaps mindful of the problems that bedevilled the overly hasty launch of Medco. The postponement was not universally welcomed however, with Aviva saying that it was disappointed with the delay. What everyone agrees on is that the reforms will have a dramatic impact on the personal injury sector and fundamentally transform the way claims are handled.

So, how will the market adapt while the reforms are being developed? This is a hugely difficult time for the motor sector – for both lawyers and insurers. With many of the details not yet agreed by the Ministry of Justice and those charged with delivering the new Litigants in Person portal, there remains a high degree of uncertainty around the final new claims landscape, which makes detailed planning difficult.

Some of the implications of the decisions already taken by the government are still being worked through. Effectively removing lawyers from the system will open up the market for claim management companies to fill the advice gap. The increased involvement of claims management companies sits uneasily with insurers which know that it will create new challenges and heighten the risk of fraud.

Without the filtering of claims by reputable lawyers, the number of claims and fraudulent cases may actually increase. Some CMCs are already preparing for a rise in the small claims limit by employing people who have no experience and no professional indemnity insurance. This will expose consumers at best to poor service, and at worse to fraud from bad CMCs. While these CMCs will still be interested in the injury claim, and particularly rehabilitation, their real focus will be on bent metal. They will be looking to capture and maximise claims for credit hire and credit repair.

The nature of claimants will also present a challenge for insurers. The reforms are based on the premise that individuals will run their own claims and the Lip portal is being built for that purpose. This change will present operational challenges for insurers in two respects.

First, dealing with third-party legal representations will place a high demand on insurer resources. Claimant lawyers currently serve as a filter for unmeritorious and unreasonable claims. That task will need to be undertaken by insurers, who are likely to be seen as biased by the claimant as they are paying the claim, whereas a lawyer is independent.

Second, insurers and brokers will also need to dedicate resources to looking after their own non-fault customers. These customers will need help in navigating what will remain a daunting process. Advising non-fault customers on claims against third parties is not only a significant enterprise requiring skill, knowledge and experience, but it also requires the insurer to be regulated by the Claims Management Regulator under the Compensation Act.

For those insurers that derive revenue from non-fault claims, it is particularly important that they retain control of the non-fault customer journey. Otherwise, they will lose significant hire, repair, medical and rehab income to other providers.

As for claims and legal solutions providers, they may also need to anticipate the impact of these reforms. Services need to adapt to the changing and increasing pressures on the market and they may be required in some circumstances to provide a more ‘hand-holding’ approach for customers.

There have been talks among lawyers and insurers to develop self-service models and this will require different skill sets, a challenge for both sides while the industry counts down to 2020.