A need for vigilance when dealing with Portal claims
Keeping claims in the MoJ Portal is an attractive proposition for insurers, one that can often deliver the best costs saving, whilst also delivering certainty of outcome. However, the recent Sunday Times investigation into a claims management company and how it ‘farms’ its claims reminds us of what is happening in a significant part of the market. Recently published fraud figures from one of the large composite insurers should also provide a timely reminder of the advantages which can flow from fully investigating claims submitted to the MoJ RTA Portals and to have portal staff properly trained to be able to detect which cases to consider dropping out of the Portal.
Just after the Sunday Times broke their story, the Portal Company released the latest set of data which revealed a cumulative increase in the average number of claims to the RTA Portal for the 14th consecutive month and showed claims heading back towards the peak of the pre-LASPO levels, seen in the first quarter of 2013, when large numbers of CNFs were issued to avoid the changes in the personal injury sector being made by LASPO.
In a period that has seen unprecedented levels of reform to tackle the “whiplash culture”, including the introduction of MedCo, as well as tighter regulation on Claims Management Companies and the insurance industry’s fight against claims fraud generally, a return to pre-LASPO claims figures seems remarkable, especially when viewed against the backdrop of fairly static levels in the number of accidents leading to injury. Paul Holmes takes a look at these recent developments and considers what it might mean for insurers’ approach to all types of claim submitted to the MoJ portals.
The adaptable claimant market
Despite supposedly losing income from referral fees, CMCs have once again managed to manipulate the market to turn handsome profits. The lastest Claims Management Regulation Unit report states that turnover levels in the CMC personal injury market have nearly returned to pre-LASPO levels. In 2011/12 turnover for the whole personal injury CMC sector stood at £354.1m which then fell 33% to £238.2m in 2012/13. According to Mr Rousell the last turnover figures available to him for 2013/14 showed turnover at £309.7m, up £71.5m from the previous year (or 30%) and 87% of the 2011/12 turnover figure. It may be more than co-incidence that a return to pre-LASPO CMC turnover has been accompanied by by a return to pre-LASPO new claims volumes.
Taking motor CNFs submitted to the portal and overlaying CMC personal injury turnover we are able to produce the graphic below:
Considering the graphic, the fall in CMC turnover in 2012/13 seems to have been followed by a fall in CNFs toward the end of 2013 and the increase in CMC turnover in 2013/14 then seems to have been followed by an increase in CNFs from mid-2014 onward. Whilst CMC turnover is given for the CMC personal injury sector as a whole and not just in respect of RTA injury claims, it would not be surprising if by the end of this calendar year CNF levels as shown on this 12 month cumulative basis return to the peak of the immediate pre-LASPO levels, possibly even surpassing them.
Many claimant solicitor business models are geared to handle vast numbers of claims in the portal and there is still a profit to be made from processing these claims and the other ancillary sources of income that they generate, such as commercially driven rehab. But these hungry business models must have claims to feed them. With reported profit from each case sometimes being as low as sub £100, the solicitors now need quick and easy payment. Essentially their business models have reversed - whereas pre-LASPO they were fuelled on litigation, 100% success fees and hourly rates, now with the Fixed Recoverable Costs regime including reduced levels of fixed costs now applying in most cases, in the post-LASPO world proceeding to trial is not as attractive as it once was. Litigation means incurring more cost: the use of more expensive staff who are able to conduct litigation, the need to meet disbursements, such as increasingly high courts fees, leading to a strangling of cash flow – all against a potentially reduced reward.
As if to emphasise the point, in response to the Quindell accounting issues Slater + Gordon announced recently that the newly acquired (from Quindell) Professional Services Division “…is now focused on the higher velocity, cash generative fast track road traffic accident segment rather than growth in cash consumptive hearing loss claims”.This clearly demonstrates how even the largest business in the personal injury market is focussing its attention on fast track motor claims due to the perceived cash generative qualities of this type of claim.
 Measured by the Regulator over a 12 month period to 30 November each year.
Challenges presented by increased RTA CNF numbers
Experience tells us that more CNFs submitted to the Portal should mean that more fraud is in the system. Yet, the number of CNFs exiting the portal for the three complete calendar years that we have complete data for has fallen, when expressed as a percentage of the total number of CNFs submitted to the Portal for that year, as the graphic below illustrates.
The Sunday Times report highlights how some of the claims are allegedly farmed. We all have dealt with cases that suggest that the practices evidenced in the Sunday Times report are widespread and many of us will have received telephone calls telling us we can make a claim, even if we protest we have not been injured, or sometimes that we have not even been in an accident.
The issues faced by insurers’ claims departments in trying to identify fraudulent claims in the Portal is extensive but it normally boils down to one thing - time. The Portal processes mean little time to investigate a claim, to consider it and reach a decision, and lack of time is one of the enemies of fraud detection.
Detection is often not aided by the information provided on the CNF. The work source field no longer features on the CNF currently in use and was rarely (if ever) completed when it did feature, as it was a field that was optional for claimants to complete. Therefore, even with a ‘risk list’ of companies (CMCs, credit hirers, etc) known to be connected to fraud on hand, it is difficult for Portal handlers to really see if a claim could be connected to dubious farming practises or organised fraud. Keeping abreast of the ebbs and flows of the fraudsters and their ever changing organisations and rings is a full time job in itself.
Some Portal claims handlers may be judged against their Portal retention rates, but are they also set a target for finding fraud? If not, a consequence may be that fraudulent claims may be missed or ignored. Those dealing with Portal claims may not have received the training to spot fraud. What fraud detection data is maintained? Is the profiling of claimant entities up to speed, so that it is known which firms are associated with which degree of risk and which potentially fraudulent business model? What are the systems like for detecting fraud in the Portal?
Claims departments dealing with Portal claims are also increasingly faced with claims for treatment, where invoices are false or inflated. These types of rogue invoices may appear genuine at first blush and may not always be picked up by handlers dealing with increased CNF numbers, unless the right systems are in place to identify the key red flags and behaviours.
Giving our opponents the quick turnover and cashflow they desire, and missing fraudulent claims as a result, can only add fuel to the fire. There has never been a more important time to strike a balance between paying genuine claims promptly within the Portal, but also having the correct skills, systems, data and processes to identify real fraud.
Perhaps a good time to look at strategies for claims in the Portal
For those thinking of having a healthcheck of their Portal strategy, it is worth remembering that where insurers choose to fight claims that have started in the Portal, but which then exit that process because they are suspected of being fraudulent, CPR r.45.29 provides that where Part 7 proceedings are subsequently then brought, the claimant should only be entitled to recover those fixed costs set out at r.45.29C and Table 6B, rather than hourly rate costs. The fixed costs regime which applies to many of these cases means that fighting these cases is more attractive than it ever was.
Post Jackson Portal strategies were often initially formulated on:
a) how much fraud cases had historically cost to litigate pre-Jackson, and
b) the pre-Jackson claimant solicitors’ business model, which favoured litigation
But times have changed and it is important that we make sure we are now not just playing into the hands of the new claimant business model.
It is of course necessary to have the basics right. If Portal claims handlers are not properly trained and able to detect fraud where it exists, and if the systems and processes used are still largely based upon old business models, then that will lead to fraudulent claims going undetected and instead being paid. This then fuels the market which, as we can see, are focussing on the quick cash generation. There is little doubt that some firms may be tempted to take on and push suspicious claims into the portal
It is also necessary to ensure that claims handling processes flow correctly, for example, looking to make sure both pre and post litigation strategies are fully joined up and flowing from one to the other seamlessly both in workflow and impact.
Whilst there are a number of potential solutions to the problem, we see as key the ongoing development of sophistication in the counter fraud market, with the increasing use of profiling and targeted counter strategies, alongside ever more sophisticated use of data and Business Information (BI).
Never has it been so important to use data and BI to actively target those claims where savings can be made. By utilising data and BI analysis it is possible to determine referral sources as well as likely discontinuance rates, to estimate prospects of success, and to identify where savings can be made but also where time and money might be wasted fighting cases.
Profiling allows us to see behind the scant information presented on the CNF and know where the cases really are coming from and what the risks are. This in turn allows us to set the correct counter fraud strategies.
We are currently involved in work with predictive analysis and modelling which is allowing clients the ability to target their resource, both at Portal level and beyond.
This is the new market we are in - working smarter where there is a need not to be reactive, but proactive, actively seeking out the fraud. Specific strategies to deal with a specific risk - not a one size fits all strategy for a certain fraud type. Those working in this way are already seeing substantially increasing real fraud savings, often without the need for litigation.
In short, the Chancellor’s announcement in his Budget that the government would carry out a “fundamental review” of CMCs could not be better timed.
For a discussion about Portal claims strategies please contact Paul Holmes on 0113 261 6521 or by email firstname.lastname@example.org
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.