In their shoes

26/10/2007

Compensation amounts paid to claimants who have suffered similar loss can vary considerably, write Gill Manley and George Lillington, as they discuss what can be done to improve equity of settlement and whether ‘real-world’ data-mining will finally prove to be the judicial system’s holy grail

The current Ministry of Justice consultation process is looking at how to improve the processes for dealing with personal injury claims, to improve access to justice and, equally importantly, to examine how to make the process more efficient and less costly.

Some things seem fairly uncontroversial. First, the consultation paper appears to signal that the £1000 small claims limit should remain, with other aspects of the claims and justice process capable of improvement to provide for fair compensation. It does seem widely accepted, however, that the limit should be amended – if only to allow for inflation.

Second, most people seem to feel that the fast-track limit is too low. A significant number of claims that have fast-track characteristics in all respects except value, end up in the multi-track process because the claim amount involved exceeds the fast-track limit. Increasing this limit would have the opposite effect in some cases – potentially leading to some complex cases that should be multi-track being caught by the fast-track process because of value. Inevitably any dividing line, wherever drawn, will be as blunt an instrument as ever. But the balance does appear to need shifting, based on the volumes of cases in each category today; and nobody disputes that the courts are capable of discerning such cases and proceeding accordingly.

Whatever processes are prescribed, and however claims may be segmented according to the most appropriate way to manage and resolve them, one overriding question remains regarding the treatment of claimants. The man on the Clapham omnibus may say, how do I perceive ‘justice’? In this context, justice means something more than a clear outcome to a case resolved in court by a judge. The Financial Services Authority is ever keen to remind everyone about Treating Customers Fairly, which may prompt the questions: as a third party claimant, who am I a ‘customer’ with and who is required to treat me fairly? Of course, by implication, the C in TCF must also stand for ‘claimants’ – whether or not they are actual customers of the insurer being claimed against.

But the key question is one that has not often been voiced in the past: if a claimant has a personal injury claim and settles without litigation, why does the actual compensation amount differ depending on the pure chance of whether the claim arose from the act of someone insured with insurer A or insurer B?

It is a cliche that the law may be an ass, but it does need to make strenuous attempts to be a consistent ass as far as possible, given the individual circumstances. Circumstances seem to differ depending on which insurer happened to have the bad luck to be in the frame – or, if it goes to court, which lawyers and which judge. As potential claimants, surely everyone would prefer to see some system or process that is a little more focused on impartial consistency.

Equal treatment

But consistency appears to be an almost unachievable ‘holy grail’. Courts and individual judges – even with Judicial Studies Board guidelines – will always differ in interpretation. Indeed everyone involved in the process is naturally subject to inconsistency no matter how experienced or well-trained.

Nevertheless, if consistency, or at least equity of treatment, is an integral part of justice, how can this be better achieved? Is is possible to get closer to such a holy grail?

It is clear to the insurance industry that technology – by automating tasks and processes associated with data – is one of the routes in pursuit of consistency. Assessment tools such as Colossus are widely used for this reason, because they do provide a basis for improving and managing the level of consistency in negotiated claims. Elsewhere, as mentioned, JSB guidelines provide a body of references that allow a clear understanding of the settlement basis for litigated cases.

One way to ensure consistency might be a tariff-based system. This is inevitably a highly prescriptive approach, which to some will be too insensitive, too simplistic and unable to take account of the nuances of cases in a way that a court, a judge, or a lawyer and claims handler in negotiation are often better able to deal with. Addressing these objections would require having a tariff that is so granular and sophisticated that it can reflect all such nuances – which, even in the highly unlikely case of it being possible to design in the first place, would be horribly complex to maintain and revise over time.

Equally, no tariff, no matter how sophisticated, will cover all eventualities; the courts would be required to intervene far too often to interpret the tariff or to review special cases apparently in need of some exemption from the tariff. Therefore a tariff system appears to have too many hurdles to overcome to be practical in the UK.

Whether a tariff or any other method is used, ‘pain and suffering’ are abstract, unempirical concepts – there is no reliable, 100% or consistent measurement of either. But justice demands a better approach to delivering consistency, without undue cost, than the current system.

Short of a tariff-based system, the best we have today for consistency comprises, on the one hand, the courts – applying the JSB guidelines, which show what the courts are doing on real litigated cases; and, on the other, insurer practice – the best of which is supported by technology tools to aid consistent assessment.

So, can current approaches and tools be improved to better deliver what the claimant might expect: equity, consistency and, ultimately, justice?

Well one thing that should not be overlooked is that there is a huge reservoir of data which could perhaps be better exploited using technology. If the definition of the ‘industry’ was extended to include the courts and the insurers, then there is a vast amount of historical case data that could be better structured to enable it to be mined.

JSB guidelines and assessment tool tunings have played a critical part in delivering consistency and will continue to do so. If it were possible add to this the ability to directly access such a database of past precedent to better inform current assessments and decisions, how much more confident could all involved parties be about the equity of the outcome?

In effect, by reviewing new claims against all past settled claims to identify where there may be closely comparable cases, perhaps the market would be able to gain many of the benefits of a tariff based system but without the need for the periodic (or constant) revision and updating that a published tariff would require.

By using the pool of real cases directly as a reference point for comparison, the effect would be to create a virtual tariff based on other past cases that had the same characteristics. With such a large pool of data it would be very much the exceptional case where no comparable prior cases could be identified – and a low number of cases needing exceptional handling would, alone, provide most claimants with considerable reassurance that they were all being treated equitably.

Leap of faith

The technological capability exists to implement such an approach, should the MoJ and the industry have the appetite for it. Even so, while such proposition is possible, it would be hugely ambitious and fraught with technical, judicial and regulatory problems as to be unrealistic in the near term.

However, such data-mining technology specifically adapted for personal injury settlements has already been developed and deployed. Its introduction is providing benefits to individual insurers in the US. It supports the negotiation and settlement phases by providing an analysis of the insurer’s previously settled cases that have close similarities to the current case being assessed.

As an adjunct to an expert assessment tool (such as Colossus) it improves the confidence that a settlement is the right one and is being settled on a consistent basis with others that are comparable. This addition of ‘real-world’ data analysis to the current tools can only improve consistency and equity.

But in a perfect world, would not the claimant have a right to expect that they will get what they are due, irrespective of who the insurer is and without being subject to the vagaries of individuals, whether they be individual claims-handlers, insurers, lawyers or indeed individual judges and courts? The market trusts this is the focus of all involved in the MoJ process – and that its outcome will lead to those claimants who have an insight into all this feel they will be more equitably and more efficiently dealt with (and will less often have to suffer the delays of the current processes) as a result of any changes introduced.

If those changes involve a more industry-consistent use of technology, then it would not matter which insurer happens to have insured the person against whom you have a claim. That at least would be one step closer to consistency and real justice.

Gill Manly is senior business consultant and George Lillington is director of CSC.

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