The Compensation Myth

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Lillian Park
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1 November 2017 The Compensation Myth An update to the 2014 Compensation Myth (authored by APIL and the TUC)

2 Introduction & Contents The Compensation Myth 2014 In 2014, the Association of Personal Injury Solicitors (APIL) and the Trade Union Congress (TUC) came together to create a document highlighting seven common myths about compensation. They provided evidence to the contrary to counteract popular misconceptions about the so-called compensation culture. Three years later, amid the latest round of proposed reforms to personal injury, we revisit those myths and determine whether there are any facts to supplant the fiction. Contents 3. Myth one 4. Myth two 5. Myth three 6. Myth four 7. Myth five 8. Myth six 9. Myth seven 10. Conclusion

3 Compensation myth one Compensation claims are spiralling out of control For a number of years, some politicians and journalists alike have asserted that compensation claims are out of control. Thankfully, we live in a time where everything is accessible online and it is more possible than ever before to separate fact from fiction. Figures from the Compensation Recovery Unit (CRU), revealed that workplace claims have more than halved in a 10-year period, from 183,342 in 2002/03 to 91,115 in 2012/13. In 2016/17 that number fell further to 73,355, a drop of almost 20%. You may be thinking that we re avoiding motor claims, as that s where the biggest number of claims are. Well In 2012/13 the number of motor claims registered to the CRU was 818,334, in 2016/17 those claims had spiralled DOWN to 780,324. That s almost 40,000 fewer claims, but it was hard to find anyone prepared to admit it Whichever way you look at it, compensation claims are lower now than they were, and they are expected to drop further still. That isn t spin, or some line to sell our point. That s simple fact, backed by the Government s own figures. So, the next time someone says that compensation claims are spiralling out of control, remember that the reality is different. Compensation claims are spiralling out of control myth.

4 Compensation myth two Workers are too ready to claim compensation Back in 2014, the compensation myth argued as inaccurate that workers are too ready to claim compensation. Backed up by reports from the Health and Safety Executive (HSE), it found that six out of every seven workers injured or made ill through work received no compensation at all. In 2014, around 90,000 people a year received compensation from their employer, undeniably a big number. However it s a relatively small percentage when the research found that the total number of workers falling ill as a result of their job was half a million, with a further 110,000 suffering an injury. But how do those figures stack up today? According to the HSE, 1.3 million workers suffer from a work related illness, with 30.4 million working days lost to work-related illness or injury. Figures by the Labour Force Survey (LFS) reveal that 621,000 people were injured in the workplace, while 137 workers were killed in the workplace (2016/17). Figures published by the Compensation Recovery Unit (CRU) revealed that there were 73,355 claims made against employers in 2016/17, a decrease of 17,760 or 19%. Conclusion When you consider that last year almost two million workers suffered from a workplace illness or injury, only 3.6% (73,355) brought a claim. Compare that to 14.7% for 2014 and the claims that there is an epidemic of workers beating down their employers door with spurious claims is untrue. Workers are too ready to claim compensation myth.

5 Compensation myth three Compensation payments are too high The difficulty in assessing the cost of compensation payments in 2017 is that there are different ways of perceiving the data, and depending on whose side you are on often determines how data is analysed. In short, opinions and assertions are subjective. One of the things that APIL and the TUC made clear in 2014, is something that we want to reiterate today. Unlike in some other countries, compensation is strictly based on what the claimant has lost. Payments are based on guidelines and evidence and are designed to compensate for actual loss, including pain and suffering, loss of earnings and future losses, all of which are very carefully calculated. Future losses can include future loss of earnings, pension loss, cost of care, medical treatment, and accommodation and vehicle adaptions. Where the victim has died, bereavement damages, funeral expenses and dependency claims would be considered. Access to Justice Lobbying group, Access to Justice, commissioned economics consultancy firm Capital Economics to analyse figures provided by 58 law firms, who between them settled 171,939 RTA claims in the previous year. The numbers showed that just under 80% of cases settled for less than 5,000 with the average value of general damages reported to be 3,029. Around 23% of settled cases settled for less than 2,000, and 90% of disbursements were incurred on claims that settled for less than 5,000, with an average gross disbursement of 624. When you consider that pre LASPO stage costs for the RTA claims portal attributed to a hefty sum to most claims, it s difficult to look at this with the right level of impartiality. It s with that in mind that I m unable to confidently label this as a myth or not. Compensation payments are too high undecided.

6 Compensation myth four Compensation is paid for any old accident Many individuals become instant experts when it comes to advising on the amount of compensation for an accident or injury that may have been caused through the negligence of another. The problem is that such advice is neither accurate or helpful when it comes to making a claim for compensation. Both claimant and defendant lawyers are more determined than ever to weed out spurious claims, and while insurer claims about the level of fraud are impossible to prove and thus hard to take as fact, there is broad agreement that fraud can be beaten if we all work together The launch of MedCo has seen a greater control over medical reports to help predetermine exaggerated or faked injuries before the process goes too far. Cold callers The backlash against cold callers, following an outcry from the public and action by the regulator, has driven a fall in the numbers of claims management companies operating today. The Claims Management Regulator s 2017 annual report showed that turnover for the personal injury sector fell 15% between 2016 and 2017 to 182m, while authorised CMCs have also fallen from 979 in 2014/15 to 752 in 2016/17*. Burden of proof In the original compensation myth document in 2014, the Government s decision to place the burden of proof on the employee and not the employer, in the event of an accident in the workplace, saw a decrease in the number of successful employer liability claims. The number of cases registered to the Compensation Recovery Unit (CRU) against employers has fallen by more than 31,000 since 2013/14 from 105,291 to 73,355. Conclusion The statement that compensation is paid for any old accident is simply untrue and assumes solicitors are gullible, medical reporting agents are careless and insurance companies are dupes. In reality, by working together they are better able to identify fraudsters and instead able to help those who need it most. Compensation is paid for any old accident myth. *Correct at time of writing.

7 Compensation myth five It is unfair that insurance companies should have to pay out for diseases such as asbestosrelated diseases where they could not have known the risk This should be a relatively short open and shut case. One of the key responsibilities of insurance companies is to assess risk and price premiums accordingly. There have been health and safety control rules on asbestos since 1931 and the risks have been known since the 1940s. When insurance companies investigated the risks of asbestos related diseases they would have been able to look back over these controls and health risks and create the appropriate policy. Insurance companies took the premiums and entertained the risk that these claims would never develop, unfortunately for victims of asbestos related diseases such as mesothelioma, that risk backfired and as a result insurers were met with hefty pay-outs. Conclusion Insurance companies spend a lot of time and money on assessing risk. On this occasion, they were presented with evidence and took the chance. Advances in medical research and health and safety provisions in the workplace will go some way to ensuring that in the future claims for industrial diseases such as hearing loss and mesothelioma will be rare. One thing is for sure, insurance companies will endeavour to triple check any associated risks on any policies they underwrite. It is unfair that insurance companies should have to pay out for diseases such as asbestos-related diseases where they could not have known the risk myth.

8 Compensation myth six Many cases would not be taken if unions didn t encourage their members to claim In 2014, while working for a well-known legal firm I wrote: Trade unions can be traced back as far as the 18th century, the period of rapid expansion of industrial society. Women, children, immigrants and rural workers were pooled into large workforces, and it soon became apparent that the voice of the many outweighed the few. Unions were formed to protect the rights of workers, and provide safe working environments and fair pay for their members. This has not changed and neither has the answer to the above statement. Unions were formed to protect the rights of workers. If an employee has an accident in the workplace and is injured, if the employer is negligent the union should encourage them to pursue a claim for compensation. Why wouldn t they? The statement is phrased in such a way that people are made to believe that claiming is a bad thing. Millions of workers depend upon unions to fight for their best interests. The key difference here is that people assume unions are encouraging workers to claim for any old incident. This is clearly an incorrect assumption as we know that the number of claims have dropped considerably in recent years (see myths 1 and 5). Until the laws were changed in 2012, insurance companies were paid referral fees for encouraging those people who had suffered an accident to make a personal injury claim. Swings and roundabouts? Pot calling the kettle black? You decide. Conclusion Technically this one is fact. But instead of looking at it as a negative, perhaps we should be grateful that there are organisations out there who are looking out for the best interests of the workforce. Also, just because they are encouraged to claim, doesn t mean the claim will be accepted. Many of these cases would not be taken if unions didn t encourage their members to claim true

9 Compensation myth seven Lawyers often drag these cases on unnecessarily to keep their costs up While lawyers are often seen in a negative light by the public this comment is grossly unfair and insulting on a different level. To assume that lawyers are all money grabbing schemers is akin to suggesting that all mechanics are grease monkeys and all footballers are prima donnas. It s wrong. One thing is true though, dragging out cases can often increase costs, but the assumption that this is always the lawyers fault holds little to no truth. Often, cases are dragged out due to the defendant failing to admit liability. This, in turn, will delay any treatment and rehabilitation which would not only benefit the claimant personally, but could greatly improve the speed of recovery. Conclusion If personal injury claims were the revolving door some believe it to be then dragging out claims would be counter intuitive. Lawyers would want to settle claims as quickly as possible to ensure a steady streamed of income. Lawyers often drag these cases on unnecessarily to keep their costs up myth

10 Compensation myth conclusion Is the compensation culture a myth? For years, the personal injury sector has been plagued by rumour and spurious comments aimed to present claimants as fraudulent and those who represent them as unscrupulous money grabbers. The reputation of the industry and those who claim compensation has suffered as a result. As a result the myths of compensation have encouraged the government to continue to remove many of the rights of victims of negligence, something organisations like Access to Justice are working to restore. However, the measures to reform personal injury have been watered down since the government s original announcement, in November 2015, and there is still no sign of a government Bill in Parliament. The truth is out there Regardless of how the industry is perceived from an external perspective, the number of claims registered to the CRU is falling each year. The socalled compensation culture is generated as a means of discrediting a group of professionals who work hard for the rights of ordinary people, injured through no fault of their own. In 2014, the compensation culture was rightly labelled a myth and in 2017 it remains so. I hope that access to new information, and a focus on the facts means we don t have revisit this issue again in another three years. Compensation Culture - myth

MEDCO CONFERENCE 18 JANUARY The RT HON. LORD KEEN OF ELIE QC KEYNOTE ADDRESS: THE IMPORTANCE OF MEDCO

MEDCO CONFERENCE 18 JANUARY The RT HON. LORD KEEN OF ELIE QC KEYNOTE ADDRESS: THE IMPORTANCE OF MEDCO MEDCO CONFERENCE 18 JANUARY 2018 The RT HON. LORD KEEN OF ELIE QC KEYNOTE ADDRESS: THE IMPORTANCE OF MEDCO Good morning to you all, may I start by thanking Martin Heskins for inviting me to provide the