Government reforms will
only benefit insurance industry as consumers lose
out
Reforms to no-win, no-fee
arrangements are unlikely to reduce premiums for consumers, said
the Law Society.
The Society is responding to a
Transport Select Committee evidence session today on the cost of
motor insurance.
Insurance premiums continue to
rise by many times the rate of inflation, despite previous
assurances of the insurance industry that any savings in legal
costs would be passed on to policy holders.
The reforms, currently being
pushed through Parliament by Conservative Justice Minister Jonathan
Djanogly, are set to make 'no win, no fee' conditional fee
arrangements much more difficult for ordinary people to use. This
will effectively remove access to justice for millions of middle
income, middle England families who are victims of accidents,
fraud, negligence, injustice and other wrong doing.
According to the Association of
British Insurers (ABI), in 2010 insurers received 46.4
billion in premiums but only paid out 30.8billion in claims,
with considerable additional income from investing its customers'
premiums.
The Society believes the
insurance industry has created a compensation culture smokescreen
to hide the real issue- insurers putting the interests of
shareholders ahead of those of consumers.
Law Society chief executive
Desmond Hudson said:
'The reforms to civil litigation
costs and funding which the Government is proposing to introduce
will further increase the profits of insurance companies to the
detriment of consumers. There will be rejoicing in the boardrooms
of insurance companies.”
'The Government has not only
bowed to pressure from insurers and but it has also fallen for the
propaganda about the so called 'compensation culture'. This
is something for which no credible evidence
exists.”
The Law Society calls on the
Government to suspend its plans and work more closely with the
legal profession in order to achieve fairer, less costly and more
effective civil litigation procedures which preserve access to
justice for consumers, reduce the cost to businesses and protect
the more vulnerable members of society.
Ends
The Law society is available for
interview and comment please call Rebecca Kiernan on
02073165592
Today Minister Djanolgy will
give evidence to the transport select committee
Transport Select Committee,
one-off evidence session
Subject: The cost of motor
insurance
Witness(es): Rt Hon Jack
Straw MP, Motor Accident Solicitors Society, AXA UK, and the Access
to Justice Action Group; and Mike Penning MP, Parliamentary
Under-Secretary of State for Transport, and Jonathan Djanogly MP,
Parliamentary Under-Secretary of State for Justice (at 2.30
pm)
Location: The Wilson Room,
Portcullis House.
Background to the
reforms
The Government's proposed
reforms to 'no win, no fee' cases are a 'cherry picking' of
reforms contained in Lord Justice Jackson's recent review of costs
which advance the interests of the negligent and other wrong-doers.
Under the plans the success fee and insurance premium for the
policy that protects claimants from having to pay the defendant's
costs if they lose will no longer be recoverable from the losing
defendant. This means that people will, if they lose the case, face
paying the defendant's costs - which for a complex case against a
large corporation like News International could run to millions of
pounds. Very few ordinary people would want to take that risk. In
personal injury cases there will be slightly more protection but
cases like the Dowlers taken under CFAs will simply be too risky in
future. Even in personal injury cases there will be new significant
risks for claimants in suing for compensation caused by the
negligence of others.
Combined with cuts to the legal
aid budget, these changes represent a significant attack on access
to justice
These changes have been piloted
by Justice Minister Jonathan Djanogly on the basis that there is a
'compensation culture' in the UK. This has been proved wrong by the
recent report commissioned by the Prime Minister by Lord Young, who
said there was no such a culture but merely a perception of one
caused by largely inaccurate media reporting.