Table of Contents

UK Personal Injury Litigation 2004 - An overview of the ATE and BTE market including analysis of the major issues facing personal injury lawyers, accident intermediaries and insurers

Product Code: dmfs1700

Publication Date: 06-Jan-2005

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Overview

Introduction

This report provides a detailed overview of the ATE and BTE markets and the development of personal injury claims in the UK insurance sector. It examines the legal and legislative factors that have been impacting the market, assesses the influence of the major competitors and determines how claims numbers and claims costs are poised to develop.

Scope

· Detailed examination of the trends in personal injury claims numbers and costs and the legal and legislative developments taking place in the market

· Analysis of leading accident intermediaries in the after-the-event market and assessment of the future prospects for players in the sector

· Consideration of BTE market and legal expenses underwriting, including a determination of market size, competitive developments and key market drivers

· Comprehensive forecasts of claims numbers and costs to predict the future direction of the personal injury litigation sector in the UK

Report Highlights

In 2003/4 the overall number of personal injury claims increased, driven by a significant increase in disease claims. The number of accident claims fell by almost 10 per cent as a result of a contraction in the number of no win, no fee competitors.

The total cost of claims reached almost £6.6bn in 2003, with particularly strong increases recorded in employers' liability claims. Average payouts for claims rose by an average 10 per cent during the year, although the introduction of a number of fixed fee regimes should help bring down claims inflation.

In the ATE market, a number of insurers have withdrawn capacity. Solicitor networks are a growing trend and are promoting themselves in direct competition to national claims helplines. Meanwhile, the BTE market is growing steadily and significant advances are expected in the commercial legal expenses sector in particular.

Reasons to Purchase

· Understand the critical market dynamics of this controversial and continually changing sector, and assess the implications of the compensation culture

· Gain insight into the business models of accident intermediaries, their use of advertising and the opportunities for competitors of various types

· Gauge the future direction of claims numbers and costs and determine what lies ahead for personal injury law firms

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CHAPTER 1 EXECUTIVE SUMMARY	3
Introduction	3
Market context	3
Overall claims numbers continue to rise, though accident claims are falling	3
Total cost of motor personal injury claims is over £4.4bn	4
Employers' liability claims costs continue to escalate	4
General liability cost burden is declining as claims numbers fall	4
The personal injury sector has been on a rollercoaster ride	4
Legal and legislative factors are set to impact further on the cost of personal injury claims	5
The Better Regulation Task Force has published a number of recommendations	6
The Clementi review will improve access to legal services	6
ATE market	7
Capacity has been leaving the ATE market	7
Advertising spend increased in 2003	7
The market has seen more competitors depart the scene	8
Solicitor networks are an increasingly common market feature	9
BTE market and legal expenses underwriting	9
Above-average growth was recorded in the legal expenses market in 2002	9
The number of legal expenses claims is rising	9
DAS remained the legal expenses market leader in 2003	9
New products are evolving in the market	9
Intermediaries are becoming a more common feature	10
The commercial BTE market is primed for growth	10
The future decoded	10
Forecast scenarios	10
Claims numbers	10
The personal injury industry expects a steady increase in claims numbers...	10
...but Datamonitor believes claims are plateauing	10
Claims costs	11
Claims costs will exceed £10 billion by 2009	11
CHAPTER 2 INTRODUCTION	25
What is this report about?	25
Who is the target reader?	26
How to use this report	26
CHAPTER 3 MARKET CONTEXT	27
Introduction	27
Personal injury claims numbers	27
Overall claims numbers continue to rise, though accident claims are falling	27
Accident claims have fallen since the departure of The Accident Group and the end of the 'harvest' period	28
Surge in disease claims has been prompted by British Coal scheme	28
Compensation claims split by insurance category	30
Personal injury within motor insurance	32
Road traffic accidents	32
RTAs are at their lowest level in years	32
One in every 145 vehicles was involved in an RTA in 2003	33
The government's road safety strategy is making demonstrable improvements	35
Road fatalities are showing a long-term decline	36
The number of slight and serious injuries continues to fall	37
Whiplash is the most common type of motor personal injury claim	38
Injuries by type of road user	38
The potential number of RTA personal injury claims	43
Personal injury claims costs and numbers	44
The number of motor personal injury claims declined by 6 per cent in 2003-4	44
Personal injury claims are the most expensive type of motor claim	45
Personal injury claims costs are rising	46
Total cost of motor personal injury claims is almost £4.5bn	48
Personal injury claims costs are mounting in motor insurance	49
Personal injury within employers' liability	51
Workplace injuries	51
Improvements in health and safety standards are reducing the number of workplace injuries	51
There has been a gradual increase in the number of injuries to the self-employed	52
Workplace fatalities continued to fall in 2003/4	54
Acts of violence within the workplace	55
A fuller picture of workplace accident trends is provided by the Labour Force Survey	56
Work-related ill-health	57
The overlap between employment tribunals and personal injury claims	59
More cases were heard at employment tribunals in 2004	60
Personal injury claims costs and numbers	63
Disease claims have rocketed in the employers' liability sector	63
Employers' liability claims costs continue to escalate	64
Claims costs could be impacted by pleural plaque decision	65
The long-tail nature of employers' liability claims creates headaches for insurers	66
Time lag between claims origin and claims settlement impacts on GEP	68
Average claims cost increases with the passage of time	70
Medical advances are influencing the claims experience	71
Personal injury within general liability	71
Injuries in the home	73
Leisure-related injuries	73
Major causes of leisure-related injuries	73
Personal injury claims costs and numbers	74
General liability cost burden is declining	74
Personal injury: 1999-2004 review	75
Compensation culture: a myth debunked?	77
The insurance industry: current system has heightened people's expectations	77
APIL: insurers are perpetuating the myth	78
Datamonitor's view	78
Legal and legislative factors affecting the cost of personal injury claims	78
Fixed costs system for RTAs	79
Insurers stand in line to make savings on claim costs	79
An end to satellite litigation?	80
Fixed success fees in employers' liability cases	80
The success fee ruling will be neither a financial advantage nor disadvantage to solicitors	80
Further fixed cost and success fee rulings	81
More speed, less haste?	81
Ogden Tables	81
Courts Act 2003	82
Recommendations of the Better Regulation Task Force	82
Regulation	83
Rehabilitation	83
APIL has launched a 'Think Rehab' campaign	83
Proving liability is an impediment to the wider use of rehabilitation	84
Lack of rigorous cost-benefit analysis halts advancement of use of rehabilitation	84
Not all claimants will benefit from the use of rehabilitation but it is still widely underused	85
A further sticking point: who takes control of rehabilitation?	86
Small claims court	86
Contingency fees	87
Clementi review and the impact on the personal injury sector	88
Proposed changes	88
Emergence of multi-disciplinary practices would broaden access to justice	88
MDPs would not be the only path to 'Tesco law'	89
The impact on the personal injury sector	90
Does this sound the death knell for accident intermediaries as we know them?	90
There is still time for accident intermediaries to clean up their act	90
The Law Society has lifted ban on referral fees	91
Personal injury reform in Ireland: lessons for the UK	92
Aims of the PIAB	92
Revised claims process	92
Future scope of the PIAB	93
The solicitors fight back	93
Will claimants lose out?	93
Is PIAB biased towards the insurance industry?	94
What can the UK learn from the Irish system?	94
CHAPTER 4 ATE MARKET	96
Introduction	96
Market context	96
The development of the ATE insurance sector	96
How widespread is ATE insurance in the personal injury sector?	96
Insurance capacity	98
New capacity is arriving from Gibraltar	99
Brit is testing the waters of the legal expenses market	99
Capacity shortage reflects type of company or claim	99
Funding capacity	99
Competitive dynamics	100
Advertising spend increased in 2003	100
Television remained the most prominent advertising medium	103
The market has seen more competitors depart the scene	104
Invaro collapsed in controversial circumstances	105
Solicitor networks are an increasingly common market feature	105
Competitive profiles	107
National Accident Helpline	108
Caseload generation	108
Solicitor panel	110
ATE insurance and premium funding	110
Accident Line	111
Caseload generation	111
Solicitor panel	113
ATE insurance and premium funding	113
Operations and business development	113
InjuryLawyers4U	113
Caseload generation	114
Solicitor panel	114
ATE insurance and premium funding	115
Operations and business development	115
RAC Legal Services	115
Caseload generation	116
Solicitor panel	116
Operations and business development	117
Other competitive issues	117
Future prospects for accident intermediaries	118
Legal sector deregulation	118
Public awareness	118
Future prospects for lawyers	119
Clementi: a threat or opportunity?	119
CHAPTER 5 BTE MARKET AND LEGAL EXPENSES UNDERWRITING	121
Introduction	121
Legal expenses underwriting	121
Market size and growth	121
Above-average growth was recorded in the legal expenses market in 2002	121
Claims experience	123
Legal expenses claims ratio was 38 per cent in 2002	123
Personal injury claims numbers are on the increase	125
BTE claims frequency has remained relatively unchanged	128
Legal expenses underwriters	128
DAS is targeting the commercial legal expenses sector	129
The Direct Line-Churchill union is creating a legal expenses behemoth	130
Competitive developments in the BTE market	130
Product extension	130
Intermediaries	131
Arc Legal Assistance entered the market in 2003	131
Temple Legal Protection is established as a leading player	131
Future prospects for BTE business	132
Automatic inclusion	132
Broker commissions	132
Underutilization	133
The case of Sarwar v Alam has done little to reverse this trend	133
Growth of legal expenses cover is further limited by a belief that "it'll never happen to me"	134
Commercial market growth	134
Disability Discrimination Act 1995	135
CHAPTER 6 THE FUTURE DECODED	136
Introduction	136
Forecasts	136
Claims numbers	136
Personal injury industry view	136
Datamonitor's view	137
Forecasts	137
Claims costs	139
The personal injury claims burden reached £7.2 billion in 2004	139
Claims costs will exceed £10 billion by 2009	140
The future of personal injury litigation in the UK	142
The new fixed fee rulings will be welcomed all round	142
ATE vs BTE will be the major battleground	142
Regulation will come into play...	142
...leading to a wasting away of unscrupulous claims farmers	143
Overall claims numbers unlikely to rise significantly...	143
...but claims costs will continue to rise	144
CHAPTER 7 APPENDIX	145
Supplementary data	145
Market context	145
Work-related ill-health	145
Third UK Bodily Injury Awards Study	146
Legal costs have remained constant at around 30 per cent of personal injury payouts	146
Average personal injury claims costs	147
Average payouts are showing double-digit growth	148
BTE market	150
Trade unions	150
Funding options for personal injury claims	152
The impact of the reforms to the Access to Justice Act 1999	152
The withdrawal of Legal Aid	153
Private funding	153
CFAs: the key to the courtroom door?	153
Legal expenses insurance	156
Definitions	156
Research methodology	157
Market context	157
The future decoded	158
Split between ATE and BTE business	158
Current publications	159
Future publications	159
Datamonitor's custom research capabilities	159
SPP writing team	161
List of Tables
Table 1: Number of personal injury claims made to general insurers, split by accident and disease, 2000-4	30
Table 2: Claims split by insurance category, 2002-4	32
Table 3: Number of road accidents in UK, 1993-2003	35
Table 4: Number of road traffic accidents and casualties in UK, 1999-2003	36
Table 5: Number of road accident casualties split by severity of injury, 1999-2003	37
Table 6: Road traffic injuries split by type of injured party, 1998-2002	40
Table 7: Potential personal injury claims arising from RTAs	41
Table 8: Comparison of share of injuries and share of potential claims split by road user type, 2002	42
Table 9: Potential number of successful RTA injury claims per year	43
Table 10: Motor personal injury claims, 2001/2-2003/4	44
Table 11: Motor claims by type, 2003	46
Table 12: Bodily injury claims volume and amount, 2000-3	47
Table 13: Personal injury claims as a proportion of motor GWP, 1999-2003	49
Table 14: Personal injury claims as a percentage of total motor claims costs, 1999-2003	50
Table 15: Workplace injuries reported under RIDDOR, 1998-2003p	54
Table 16: Workplace fatalities reported under RIDDOR, 1999-2004p	55
Table 17: Acts of violence within the workplace, 1998-2003p	56
Table 18: Total number of workplace accidents, 1998-2003p	57
Table 19: Number of cases of occupational disease and work-related mental ill-health, 1999-2003p	59
Table 20: Number of applications registered by employment tribunals including sex, race and disability discrimination cases, 1999-2004	62
Table 21: Median and average compensation awarded by tribunals for sex, race and disability discrimination cases, 2002-4	63
Table 22: Number of employers' liability personal injury claims split by accident and disease, 2001-4	64
Table 23: Employers' liability gross incurred claims, 1999-2003	65
Table 24: Number of employers' liability claims paid by year of origin, 1993-2002	68
Table 25: Employers' liability claims costs as a percentage of GEP in year of origin, 1993-2002	69
Table 26: Average cost of paid employers' liability claims by year of origin, 1993-2002	71
Table 27: Number of home and leisure-related injuries, 2000-2	72
Table 28: Fixed cost and success fee arrangements for RTAs in ATE market	79
Table 29: Advertising spend of key personal injury competitors, 2001-3	103
Table 30: Advertising spend of key competitors by medium, 2003	104
Table 31: National Accident Helpline's monthly accepted caseload, 2001-4	109
Table 32: Accident Line's monthly accepted caseload, 2001-4	112
Table 33: Legal expenses premium income by line of business, 1992-2002	123
Table 34: Ratio of claims incurred to GEP by sector, 1992-2002	125
Table 35: Claims incurred and number of claims notified by sector, 1992-2002	127
Table 36: Selection of commercial legal expenses partnerships, 2004	135
Table 37: Scenario forecasts for personal injury claims numbers, 2002-9f	138
Table 38: Personal injury claims costs by line of business, 2002-4	140
Table 39: Scenario forecasts for personal injury claims costs, 2002-9f	141
Table 40: Prevalence of occupational ill-health by type, Great Britain, 1995-2001/2	146
Table 41: Legal costs and personal injury claims costs for motor insurers, 1998-2002	147
Table 42: Average cost of personal injury claims by type, 2003	149
Table 43: Market share of legal expenses insurers, 1999-2003	150
Table 44: Claims handled and awards won by trade unions, 1999-2001	152
Table 45: Datamonitor estimates of the split between ATE and BTE business, 2001-4	158
List of Figures
Figure 1: Key milestones in the development of the personal injury sector	5
Figure 2: RAC and Personal Injury Helpline were particularly active in increasing advertising spend in 2003	8
Figure 3: The personal injury industry is bullish about future claims prospects	11
Figure 4: A decline in accident claims has been offset by a rapid increase in disease claims	29
Figure 5: Motor and employers' liability make up the majority of personal injury claims	31
Figure 6: The number of RTAs has fallen for six successive years	33
Figure 7: Proportionally fewer vehicles are involved in RTAs than at any time in the last decade	34
Figure 8: The number of casualties is declining year-on-year	36
Figure 9: The number of slight injuries fell for the third successive year in 2003	38
Figure 10: More passengers and motorcyclists were injured in 2002 than in 2001	39
Figure 11: Passengers account for the majority of personal injury claims	42
Figure 12: Motor personal injury claims are declining in frequency	44
Figure 13: Personal injury claims are the most expensive form of motor claim but the least frequently paid	45
Figure 14: The severity of personal injury claims is escalating	47
Figure 15: Personal injury claims were worth a third of total motor GWP in 2003	48
Figure 16: Personal injury claims are making up an increasingly large proportion of total motor claims	50
Figure 17: The number of workplace injuries is gradually reducing	52
Figure 18: Injuries to the self-employed are showing a worrying rising trend	53
Figure 19: Employee fatalities fell slightly in 2003/4	55
Figure 20: Cases of lung disease are becoming more prevalent while the number of non-lung disease and mental ill-health cases falls	58
Figure 21: There was a significant rise in the number of employment tribunal applications in 2004	61
Figure 22: Sex discrimination cases are the most volatile	62
Figure 23: 2003-4 has seen an escalation in the number of employers' liability disease claims	64
Figure 24: Employers' liability claims costs are experiencing double digit growth	65
Figure 25: Employers' liability claims have a long latency period	67
Figure 26: Insurers continue to feel the bite from claims years after the date of origin	69
Figure 27: Average employers' liability claims cost increases with time	70
Figure 28: Between 2000 and 2002 there have been more leisure-related injuries than injuries in the home	72
Figure 29: Public liability claims fell sharply in 2003-4 after a rise in the previous year	74
Figure 30: Key milestones in the development of the personal injury sector	76
Figure 31: Claims costs could be reduced by a third with the use of rehabilitation	85
Figure 32: The vicious circle of an incompletely covered ATE market	97
Figure 33: RAC and Personal Injury Helpline were particularly active in increasing advertising spend in 2003	102
Figure 34: InjuryLawyers4U currently has the largest monthly caseload of all profiled accident intermediaries	107
Figure 35: National Accident Helpline profile	108
Figure 36: National Accident Helpline has almost doubled its caseload in three years	109
Figure 37: Accident Line profile	111
Figure 38: Accident Line's monthly accepted caseload has stabilised	112
Figure 39: InjuryLawyers4U profile	114
Figure 40: RAC Legal Services profile	116
Figure 41: Growth occurred in all legal expenses lines bar non-motor commercial in 2002	122
Figure 42: The legal expenses insurance market has reached a plateau of profitability	124
Figure 43: The total number of claims increased by 12 per cent in 2002	126
Figure 44: DAS and RBS Insurance Services together account for half the total legal expenses market	129
Figure 45: The personal injury industry is bullish about future claims prospects	138
Figure 46: Datamonitor's scenario suggests claims costs will rise to over £10bn by 2008/9	141
Figure 47: Stress and related conditions have increased dramatically since 1995	145
Figure 48: Legal costs have remained a consistent proportion of personal injury claims	147
Figure 49: Commercial personal injury claims are generally higher in value than personal claims	148
Figure 50: The number of claims handled by trade unions has fluctuated	151
Figure 51: Datamonitor's core consulting capabilities	161

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