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Society attacks insurers for failing to pass on £500m portal savings

'No confidence' that future savings will help consumers

6 June 2012

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The Law Society has attacked motor insurers for failing to pass on savings of “well over” 500m from the RTA portal.

The attack came as the OFT considers referring the motor insurance industry to the Competition Commission.

The society was responding to a call for evidence from the MoJ, which is planning to increase the value of portal claims to £25,000 and extend it to employer’s and public liability cases.

“It is estimated that the portal already deals successfully with in excess of 600,000 cases each year (about 80 per cent of all personal injury claims) and that has resulted in savings of well over £500m for insurers since its inception in April 2010,” a spokesman for the society said.

“The fixed costs which are payable were negotiated and agreed by stakeholders including the ABI.

“Despite this agreement, and the resulting massive savings in legal costs, there is no evidence that insurers have passed on these savings, despite promises made during the RTA portal negotiations in 2009.”

The society said it had “no confidence” that future savings from the Jackson reforms would be passed on.

It said the RTA portal fees, which the government wants to cut, had not increased since the portal was introduced.

“Because of inflation the value of those fixed costs has decreased in the last three years and this in itself would have resulted in real term savings for compensators but, again, such savings have not been passed on by insurers.”

The society said it believed that changes to fee rates for the RTA portal need to be based on strong evidence and research needed to be undertaken independently to inform discussions.

“It is a basic tenet of the rule of law that individuals should have access to legal advice and support of the quality they need in order to bring a claim.

“It is a feature of our legal system that such claimants should not be out of pocket as a result of bringing a claim against a wrong doer. Those who will be supporting them need to be appropriately remunerated and there needs to be proper evidence to justify changes.

“We are also concerned that government may not be approaching this consultation with an open mind. Following the recent seminar with insurers, a statement was issued stating that government would be reducing the fixed recoverable costs. We believe that such a statement was premature and not based on appropriate evidence.”

The society warned that the Jackson reforms and legal aid cuts meant there would be a “decrease in legitimate accident claims”, meaning that the government would lose out through reduced recovery of state benefits and NHS medical costs.

“The argument put forward by insurers that referral fees have led to an increase in legal costs and that prohibiting the payment of such fees in personal injury actions will result in an increase in profits for solicitors is false and mischievous.

“There is not only no empirical evidence to substantiate this argument but there is overwhelming evidence pointing to the opposite.”

The society said a survey of its members showed that ten hours of work were involved in a portal case and the maximum fee of £1,200 was justified.

However, the society said it accepted “in principle” an extension in the size of claims handled by the RTA portal and the “horizontal extension of a portal-type process” to employer’s liability and public liability claims.

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