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Arc Legal has produced a series of options papers considering different aspects of the proposed changes to small claims court limits and removal of compensation for soft tissue injuries and their potential impact on Legal Expenses Insurance (LEI).
The most recent paper considers potential options for motor LEI product development in the event that road traffic accident whiplash and soft tissues injury claims are banned.
It is important to stress that these are high level options based on the limited level of information available following the Chancellor’s announcement of proposed changes to the Road Traffic Act personal injury claims system set out in his Autumn Statement last November.
Whilst claims involving non-soft tissue injuries, recovery of uninsured losses and defence of motoring prosecutions would still be covered; if there was a full removal of ‘general damages’ for soft tissue injuries, that still means over 90% of personal injury claims currently covered under the motor LEI policy would be removed from the system.
We firmly believe that removing these claims would provide an opportunity for the product to develop and fill the void that would be left by the changes.
For example, we might see the inclusion of a form of personal accident cover that could be extended to soft tissue injury claims and would pay the policyholder a fixed sum, on satisfaction that the accident and injuries are genuine.
The cover could also be extended to meet the costs of rehabilitation1. The policy could source, arrange and pay for physiotherapy and other rehabilitation treatment to policyholders’ who have been involved in non-fault accidents with an identifiable negligent third party. There would still be an assessment of reasonable prospects of recovering the rehabilitation costs against the third party.
Under the current regime, solicitors will recover a customers’ uninsured losses using their earnings from personal injury claims to subsidy the uninsured loss recovery (ULR) cost. With the removal of soft tissue injury claims, there is a question as to whether this model would be viable. However, it is quite possible that solicitors could use the earnings from those injury claims that remain in the system to subsidise the ULR cost. Otherwise, this will be an additional servicing cost that needs to be catered for within the premium.
One of the key drivers to the costs of these cover features will be the commercial terms that panel solicitors are able to offer. These will be based on factors including the revenue generating options available from the injury claims left in the system, and this could greatly impact the level of serving cost needed to be incurred.
To obtain a copy of any of Arc Legal’s options papers responding to the proposed changes to the personal injury claims system, please contact your account manager.
1(Recoverability of ‘special damages’ such as rehabilitation costs from the at-fault party would still be allowed if whiplash claims were banned).