Article for The Actuary

                                                       Better routes to redress

Guy Thomas considers the Better Regulation Task Force’s report on accident compensation

The story so far

In December 2002, the Actuarial Profession promulgated a GIRO paper The Cost of Compensation Culture making a number of assertions about accident victims and compensation paid to them by negligent parties.  The evidence for some of these assertions was questioned in Tony Silverman’s article Justice Culture? (The Actuary, September 2003), and in my own letter to The Actuary (Letters, October 2003).   The GIRO paper was subsequently highly commended by the Institute Council.  According to documents on to the Profession’s website, its conclusions now constitute a ‘line to take’ for the Actuarial Profession.

Task Force report

In this context it was interesting to read the recent report Better Routes to Redress published in May 2004 by the Better Regulation Task Force.  This is an advisory group comprised of business people, members of various professions, citizen and consumer groups, and trade unions, which produces recommendations to Ministers for ensuring that regulation is “proportionate, accountable, consistent, transparent and targeted.”  The current chairman is David Arculus, chairman of the FTSE100 company Severn Trent plc.   Other recent reports of the Task Force have carried titles such as ‘Independent Regulators,’ ‘Alternatives to State Regulation’ and ‘The Regulation of Child Employment’.

The Task Force’s report Better Routes to Redress addresses similar issues to The Cost of Compensation Culture, but with very different emphases and conclusions.  The quotations highlighted in the panel in this article give a flavour of some of these differences. 

Another difference between the two reports is inherent in their respective titles: Better routes to redress suggests solutions, whereas The cost of compensation culture suggests, in my opinion, a negative and pejorative approach to accident victims.   This is not just my own opinion: the unhelpfully pejorative tone of the phrase ‘compensation culture’ is a point highlighted in the Task Force’s report.

((The Task Force also emphasizes (p6):"Central to our report is the injured party - the most important person in the process."    The Actuarial Profession’s report is again very different: as far as I can see, it contains essentially no consideration of the perspective of an injured party.

The essential conclusion of the Task Force is stated as follows (p12):

"Almost everyone we spoke to in the course of this study told us that they did not believe that there is a compensation culture in the UK.  They argued that the reality is somewhat different, because the number of accident claims, including personal injury claims, is going down."

Whilst the Task Force considered contributions from around 100 organisations, the words "actuary" and "actuarial" are nowhere to be found in their report.  But this does not necessarily mean that the Task Force failed to understand the contribution of commentary from organizations such as the Actuarial Profession.  I think they understood it very well, well enough to write as follows:

“Senior commentators, who are frequently reported, also perpetuate the perception of the ‘compensation culture’.  They make speeches decrying the ‘compensation culture’ without offering any solutions.  Such speeches also give the impression that there are dual standards being applied to people litigating. Commentators are fond of criticising ‘ordinary’ people, but rarely criticise big companies or well-known figures for litigating.  This gives the impression that there is something wrong if ‘ordinary’ individuals exercise their rights.  People should be able to claim redress when their rights have been infringed.”

The Task Force has some recommendations for these commentators:

“It would be helpful if those in positions of influence could resist talking about the ‘compensation culture’. Doing so only perpetuates the problem.  It would be more beneficial to educate people to understand that compensation is minimal in most cases and to educate those litigated against that the best way to avoid litigation is to be aware of the risks and to have taken cost effective measures to manage them.”

For an example of the ‘dual standards’ referred to by the Task Force, we need look no further than the suggested definition in the Actuarial Profession’s Report of the term ‘Compensation Culture’ –

“The desire of individuals [my emphasis] to sue somebody, having suffered as a result of something which could  have been avoided if the sued body had done their job properly.”

which conveniently excludes corporations (eg insurance companies) who decide to sue somebody.   It appears that individuals who litigate attract the censure of the Actuarial Profession, but corporates who litigate do not.  

Suggestions for reform

In a chapter titled ‘Making the system better for genuine claims’, the Task Force makes suggestions covering the following areas:

·         Claims management companies (regulation, consumer advice and advertising)

·         The possibility of raising the limit under which personal injury can be taken thorough the small claims track

·         Improvements to ombudsmen schemes (removal of jurisdictional overlaps, and better publicity)

·         Research on potential impact of contingency fees in securing access to justice

·         Rehabilitation for accident victims (research on economic benefits, and mechanisms for earlier access)

·         Promoting better management of occupational health (eg better publicity for tax breaks).

·         Better risk management by public bodies (including insurer-facilitated of sharing of best practice).

It is not the purpose of this article to evaluate these suggestions.  But I hope that actuaries will consider them, and put forward other constructive suggestions to support the Task Force’s aim of ‘making the system better for genuine claims.’

Media contradictions

One observation which neither of the reports make is the inherently contradictory contributions of news media organisations.  One the one hand, any ‘senior commentator’ alleging the existence of a ‘compensation culture’ seems assured of widespread coverage and favourable editorial comment, often with little critical consideration of their claims.  On the other hand, following any particularly newsworthy tragedy, the same media organizations will immediately change tack: they do not merely report the facts and apportion blame for the specific tragedy, rather they often orchestrate popular campaigns for a perhaps disproportionate regulatory response.   I can see nothing that can be done about this contradiction, but perhaps it should give pause for thought to ‘senior commentators’ who draw comfort from favourable press coverage.

Suggestions for the Actuarial Profession

My own suggestions for the Actuarial Profession are as follows.

·         Act on the recommendation from the Better Regulation Task Force: "It would be helpful if those in positions of influence could resist talking about the ‘compensation culture’. Doing so only perpetuates the problem.”

·         More generally, avoid promulgating comments which denigrate accident victims who seek compensation from negligent parties.  (The Task Force has identified several elements of this quite clearly in the quotations in the panel:"...decrying the compensation culture without offering any solutions... criticising ‘ordinary’ people, but rarely criticise big companies or well-known figures for litigating…give the impression that there is something wrong if ‘ordinary people’ exercise their rights.”)

·         Abandon assertions (eg on the profession's website) in the nature of "The profession believes that a more litigious society would be a bad thing because the costs, both financial and in terms of restricting activities, outweigh the benefits of providing better compensation to accident victims." This is a transparently political attack on accident victims, which has no prospect of objective justification.

·         Consider the needs and perspectives of injured individuals, not just those of insurance companies. 

BOX

The Better Regulation Task Force’s report is available at www.brtf.gov.uk

Guy Thomas

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