News Analysis: RTA reforms set to launch

On 30 April 2010, the Ministry of Justice's long-awaited personal injury reforms for road traffic accidents come into force. A new electronic portal for the transfer of information between solicitors and insurers, a fixed-cost structure and tight deadlines could see claims - where liability is accepted - agreed within 30 days. Justice minister Bridget Prentice commented: "This scheme will mean that everyone knows in advance what the costs will be and it will be simpler and quicker to complete a claim."

Antony Summers, personal clients sales director at Jelf-owned Clarke Roxburgh, said: "These government-led reforms are the most radical changes to the claims process…seen for some years."

The reforms focus on claims worth between £1,000 and £10,000 and, with up to 500,000 individuals expected to be affected, it is one that brokers should be prepared for. Nick McMahon, partner at London-based law firm Reynolds Porter Chamberlain, said: "The scheme won't apply to catastrophic events or where liability is disputed but it is widely perceived that the majority of road traffic accident claims fall within its level. Claims are going to be pushed through more quickly and brokers should expect to be kept informed by insurers."

Noticeable effect

According to Summers, on a day-to-day basis brokers will see little difference in their claims handling processes but there will be a positive effect. He said: "Claimants should benefit from quicker settlements that, before the reforms, were sometimes unnecessarily delayed. This will reduce the burden on us and our uninsured loss recovery providers to send numerous reminders as to the claim position."

Paul Hurley, business development and marketing director at Arag, confirmed that his company "is moving in the right direction and that everything will be in place for the end of the month" but pointed out that "it is a wait-and-see situation for legal insurers." He agreed that, while brokers may not be directly affected, they still have a key role to play. He said: "The most important aspect is for brokers to get information as quickly and efficiently to solicitors as possible. It is a streamlined electronic system, moving away from paper that speeds up the process to make compensation paid quicker, which is a good thing all round."

Graeme Trudgill, technical and corporate affairs executive at the British Insurance Brokers' Association, also urged brokers to educate their policyholders to provide comprehensive and detailed accounts of incidents at the outset and described the 15-day deadline as "extremely tight". He added: "Brokers must encourage all their clients to report motor accidents immediately. Early notification of accidents provides their insurers with the best opportunity of managing costs if an injury claim materialises. The average saving could be anything up to £1,800 for a claim under the new process."

Long-term backer

Allianz is one insurer that has supported the proposals from the outset. Roy Hebburn, divisional claims manager at the insurer, explained: "If insurers are organised, they take advantage of the process and the cost of claims will reduce. In most cases of a rear-end shunt, there's no argument on liability." Hebburn urged brokers to continue to give insurers as much notification of a claim as possible: "If our first notice of an accident is a claim coming through an electronic portal from a solicitor then it is too late because our clock is running."

Hebburn cited drivers with third-party only cover and commercial fleet as two areas where there can be a delay in notification. He added: "Once liability is admitted, it can't be changed. If a claim falls out of the process it cannot re-enter. Instead, you negotiate as at present and you lose the time limits."

In theory, the potential for cost savings could lead to a reduction in the rate of claims inflation and Hebburn stressed: "You cannot stick your head in the sand on this. If insurers are not ready then it will hit them financially."