Who is really chasing the ambulance?

01/07/2009

By Alex Drake, Associate and Dominique Parker, Associate in Personal Injury.

Many claimants are being misled - not by solicitors, but by insurers engaging in what is known as 'third party capture'.

People are told that dealing direct with the insurer will save them money as they will not have to pay legal costs. What they are not told is that the legal costs would anyway be recoverable from the insurer.

Third party capture is massive business and particularly common in road traffic claims. Some claimants report being contacted within hours of their accident with offers to deal with their claim direct. There have even been reports of one insurance company offering policyholders a 10% discount on their following year's premium if they provide the contact details of the innocent party within 24 hours of an accident in which their policyholder is at fault.

Why is there a problem? It is easy to spot the clear conflict of interest in the compensator advising the claimant. Are the claimant's interests really always put above that of the shareholders?

The insurance industry insists that these claims are dealt with fairly. While there may be examples of good practice, the Association of Personal Injury Lawyers collected numerous examples of problems claimants have encountered when dealing with defendant insurance companies direct. They include insurers telling claimants that they do not have a viable claim, not obtaining complete medical evidence, not including all losses that the injured party is entitled to claim and advising under settlement.

The Compensation Act 2006 did not make provision to regulate insurance companies in this area of business as the view was that third party capture would come under Financial Services Authority (FSA) jurisdiction. However, the FSA does not consider it has the power to regulate insurers dealing with third parties who are not their contractual clients.

The FSA began investigating the issue in 2007. Figures showed that where claimants had gone on to seek independent legal advice later on, settlements were on average 50% higher than initially being offered. Despite showing a willingness to investigate, however, there has been nothing from the FSA to acknowledge there is a problem or to take steps to deal with it.

With the FSA focused on revising the regulatory framework surrounding banking activities, third party capture is unlikely to be high up their agenda.

Having acknowledged that regulation has been too 'light touch' in recent years the Government must, therefore, step in and either introduce specific regulation to deal with third party capture or bring it under the remit of the Compensation Act. Insurers should be subject to the same rigorous rules and sanctions governing lawyers.

Using pressure tactics to push claimants to settle far too early and for far too little and not informing them of their rights to independent legal advice is unethical. The majority of personal injury claimants will have little understanding of what is the correct level compensation. Cutting out lawyers may arguably make the process quicker, but this is likely to be at the expense of the injured person, who may settle for significantly less than their claim is worth.

Such a situation is unacceptable. It is vital that the public is made aware of the potential pitfalls in trying to deal with their claim without proper legal advice. Put misleading the claimant to an end.