Reforming the compensation system to put claimants first

Before a parliamentary briefing today, Stephen Haddrill, the director general of the Association of British Insurers, and Teresa Perchard, the director of policy at Citizens Advice, propose a new fast track system for processing personal injury claims. Insurers at present pay some £2bn a year in legal costs dealing with these claims
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Accident victims, employers, insurers and lawyers have one thing in common. They are struggling with a system for compensating claimants that is adversarial and dysfunctional.

The latest government research shows that liability is not disputed in 80 per cent of all personal injury claims. But it takes on average three years to settle a personal injury claim under an employers' liability insurance policy, and two years for injuries after a motor accident. Insurers pay £2bn a year in legal costs on top of the £4.5bn paid out in compensation every year - costs that eventually fall on customers.

But, far from there being a compensation culture, many people who have suffered injuries are not being helped at all by the current system.

The Government is taking important steps, principally through the current Compensation Bill, to clean up the cowboy culture that has been allowed to grow up through unregulated claims-handling organisations approaching customers. These reforms are most welcome - but on their own do not address the whole problem.

Tonight, the ABI and Citizens Advice will host a parliamentary discussion on how a new system could ensure that claimants are put first, not last. We both see the current system as too slow, complex and costly. It undervalues the importance of rehabilitation. Everyone involved in the current system must recognise that reform is needed to get the care and compensation they deserve more quickly.

The ABI has put forward proposals that can form the starting point for this important debate. They include a new fast track system for providing care and compensation for claims up to £25,000 - that's 90 per cent of all personal injury claims.

Claims would be notified to insurers more quickly. This will speed up paying compensation where it is due. Rehabilitation care will be available earlier - crucial in aiding recovery. And a new public tariff of damages would allow everyone to see what they are entitled to.

Safeguards in ABI's proposals will protect claimants' interests. Fixed timetables, independent arbitration and free independent legal advice at key stages in the process, along with the public tariff on damages, will ensure claimants get fair compensation more quickly.

There will be differences of view about the details of what we need to do to reform the system. Compromise will be needed. We want to develop a consensus for reform that builds on what we all should want - a system that delivers care and compensation to those who need it more quickly and effectively than it does at present.

It can be done. Similar reforms in Ireland in recent years mean that compensation is now paid three times more quickly and four times more cheaply than before. Crucially there has been no reduction in compensation going to claimants.

Such reform should be a priority for this government. People on Incapacity Benefit - perhaps due to an injury - for longer than two years are more likely to retire or die than go back to work. Employers, especially small firms, cannot cope with years of legal wrangling. And the massive amount of money paid out by insurers and claimants on legal bills should be spent in other ways with benefits to all our lives.