Road traffic accidents: claimant solicitors should be able to make a fair and reasonable profit
The Association of British Insurers (ABI) may call for the fixed fees payable under the RTA portal to be slashed by nearly 90% to £150 as part of its negotiation strategy, a leaked e-mail has revealed.
The e-mail sent out by the ABI on 20 April – and seen by Legal Futures – sought to canvass views on whether it should propose that the current fee of £1,200 should fall to £150 or £350.
It said the ABI has commissioned costs consultants to examine the work involved by a claimant law firm in processing a low-value RTA claim through the portal so that it can submit a “robust and evidence-based response” to the Ministry of Justice’s (MoJ) consultation on the level of fees, which closes on 25 May.
It comes in the wake of the prospective ban on referral fees, Jackson reforms and plans to extend the portal to bigger road traffic claims and other kinds of personal injury actions.
The consultants are factoring in the averages of the salaries of the staff involved, their efficiency rates and allowing for overheads in an efficiently run claimant law firm, the ABI said.
While the work is incomplete, the e-mail said preliminary analysis suggests these claims can be processed profitably for £150 as the direct staff cost. “If we adopt an approach that uses salaries at the higher end of the fee-earner scale or more senior staff involvement, the analysis would suggest that a figure of £350 is more appropriate.”
The e-mail sought “a tactical steer”. It explained: “If we were to advance a figure of £150, it could increase cost savings to insurers from reducing the fixed fee but it runs the risk of the industry being seen to be unreasonable, with the potential for us to lose credibility in the debate with the final fee decided by the ministry being substantially increased.
“If we advance a figure of £350, this could limit the cost savings to insurers of the reduced fee but increase our credibility in the debate and the ministry may undertake a deeper analysis of the evidence we advance rather than potentially dismissing it.
“In considering the competing factors [on 19 April], the personal injury high level group was of the view that this was a decision that should be made by GIC [General Insurance Council] and their view, although finely balanced, was that we should advance the £150 figure, recognising that the ministry will inevitably set a number higher than that, ie the £150 should be advanced as a negotiating tactic.”
The e-mail’s author, James Dalton, assistant director, head of motor and liability at the ABI, told Legal Futures that these are “just options amongst a range of others we are considering before we finalise our response and provide it to the MoJ. Our preliminary analysis suggests that claims can be processed by claimant lawyers who can make a fair and reasonable profit at each of the figures we are considering. No final decisions have been taken on our preferred option”.
Andrew Dismore, who runs the Access to Justice Action Group, said the e-mail revealed insurers’ “cynical drive to the bottom”. He accused insurers of trying to price solicitors out of doing this work so as to boost their push for third-party capture and before-the-event insurance to take over.
He acknowledged that claimant groups would be also seeking to take a tactical negotiating position at the other end of the spectrum. While there is “no doubt that the portal has enabled people to make some savings”, they did not justify cutting fees to the levels being considered by the ABI, Mr Dismore argued.
The MoJ has held one meeting for all stakeholders about the portal changes, and will this week hold a series of smaller meetings with groups of stakeholders. Claimant groups are having their meeting today with justice minister Jonathan Djanogly, with insurers in on Thursday.
What level of legal advisor will process a claim if there is only £150 in costs?