Post Magazine & Insurance Times
9 October 2008 Editions
To request the full text of the ‘feature articles’, please email:
eleanor.mole@blm-law.com
Post Magazine
News
Goodwin tipped to go as RBSI sale drags on
Towergate: Open GI has attracted bid interest
Synergy to enter high net worth
UKRC releases draft of rehab standards
Brit launches bolt-on rehabilitation service
ABI in road safety call
Pitts takes up job at Allianz
RSA: protect public data
Axa restructures division in push for number one spot
Total faces £700m blast payout
Zurich's pleural warning
Unfair fraud detection rates favour large insurers
Property insurance scams crackdown
Tele-staff underused
Motor fraud sexier than EL and PL
Police forge ahead with fraud pilots
KPMG: amateur fraud to rise
Extra funding not an issue, says IFB chair
DLA Piper teams join Kennedys
Feature articles
Credit hire: Market relationships – Working in harmony
When credit hire operators and insurers have different business goals, how can they work
harmoniously together? Post Magazine finds a way.
Motor Claims – Car crash law
Just as insurers get their heads round the European Union directives on cross-border motor
claims, Rome II promises further clarification in January 2009. Post Magazine gives the legal
low-down.
Public Sector: Partnership working – A risky business
Partnership working has become the norm for cash-strapped local authorities working to
achieve change for their communities. David Forster (Zurich Municipal) considers how to
manage the risks incurred.
Fraud – Online and dangerous
The credit crunch and the migration of policy sales online appear to have provided motivation
and easier opportunities, respectively, for criminals to commit fraud. But is this the case and,
if so, what can insurers do to combat the risk?
Fraud – Stretching the truth
Asim Butt explains why tackling employers' liability fraud is receiving more attention from both
insurers and their clients.
Law reports
Damages assessed as council allows trespass
Road accident victim case offers Ogden guidance
Asbestos case raises issues
Preliminary hearing denied
Insurance Times
News
Quinn to leave Giles
AIG UK chief vows to battle on as Congress investigates insurer
Quinn and AIG clean up in solicitors’ PI renewals
Zurich: don’t change pleural plaque law
New deal for e-repository
Axa hires more staff in commercial shake-up
Feature articles
Legal focus – Your learned friends need you
The British Insurance Law Association is packed with legal boffins but, to make a difference in
the industry, it wants the street smarts of brokers, underwriters and loss adjusters. Insurance
Times met its chairman, Julian Burling, to find out more.
Conference 2008 – The Party’s over
The conference season has come to an end but the financial crisis that dominated the Labour
and Tory gatherings continues to grab the headlines. Insurance Times explores the policies
and debates that will affect your business.
Legal focus: Border skirmish
The battle between the Scottish government and insurers over pleural plaques is getting
serious – and it could have ramifications on both sides of the border. But Fergus Ewing, the
SNP minister, is not about to budge, he tells Insurance Times.
Profile – Hungary for risk
Getting into the property sector might seem ill advised at the moment but Bernard Mageean,
managing director of QBE’s property division, is on a drive to boost the business to £200m.
He explains why to Insurance Times.
Sponsor’s word – The ‘R’ Word – keeping it legal
Current economic pressures may force many companies to consider redundancies. That is
the time, says Peter Dobie (Allianz Legal Protection), when legal expenses clover can help.
The Lawyer
News
New team boosts Shoosmiths’ turnover
Reed Smith's Birmingham office goes it alone
The Law Society Gazette
News
Firm breaks new ground by sending PI work to South Africa
Feature article
Local government – Walking taller
Local authority legal departments are increasingly competing with private firms for public
sector work. The Law Society Gazette investigates.
Goodwin tipped to go as RBSI sale drags on
The men who put Direct Line, Churchill and NIG up for sale are to leave Royal Bank of
Scotland according to reports this morning.
According to the Telegraph chief executive Sir Fred Goodwin and chairman Sir Tom McKillop
are out. It added they are to be replaced by Stephen Hester, formerly of the Abbey, and Sir
Philip Hampton, currently chairman of Sainsbury's.
In August this year Mr Goodwin insisted the sale of its insurance arm could be weeks away
after reporting a loss of £691m - the second biggest in banking history for the first six months
of 2008.
However, despite the bank insisting the sale is going to plan and could take time, many of the
original frontrunners for the business have pulled out or face their own problems including
Allianz, Zurich and AIG.
RBS' need for capital was heightened yesterday as its shares tumbled 39%wiping £9.6bn of
its share value. The insurance businesses have been valued at between £4.5 - £7.5bn.
Royal Bank of Scotland Insurance reported an operating profit of £403m for the first half of
2008, up from £258m from the same period in 2007.
Towergate: Open GI has attracted bid interest
Towergate has moved to suppress growing speculation it is proactively looking to sell Open
GI - a year after its £276m acquisition - to raise funds. However, the broker did not rule out a
disposal if it received the right bid.
Market sources have indicated that Towergate has taken the proposition of selling Open GI to
its financial advisers Lexicon Partners, who brokered the original acquisition of the software
house, and helped to raise more than £100m in July for Towergate Financial to acquire
regional IFAs.
A spokesman from Towergate maintained that, although linked by common shareholders,
Open GI was a distinct company from Towergate Partnership with its own separate financing.
He told Post: "Open GI has no 'for sale' sign - we are not proactively trying to sell it. Open GI
is one of the most successful parts of Towergate and like all lucrative businesses, we are
bound to get enquiries about acquiring it. Lexicon Partners would be dealing with any interest
from potential buyers."
One source suggested the consolidator has had to reassess its financing in the current
climate, and Open GI is seen as a non-core asset to the overall group - but believed it would
want to keep the Countrywide network and its 700 members.
"Open GI doesn't sit well with Towergate as it was a diversification," the source said. "I don't
believe that, financially, it is causing any problems but it might present a big effort in terms of
resources."
In June this year, Towergate - including Broker Network, Paymentshield and Open
International - reported total sales of £2.1bn gross written premium and income of £394m.
"Banks are squeezing hard for a revisiting of the rates in the debt structure, and Towergate
will need to raise cash to reduce the debt," another source said. "It has never fully integrated
its businesses and while the market is easing up on rates it is more difficult to raise capital."
TOWERGATE - ITS FINANCIAL DEALINGS TO DATE IN 2008
February: Private equity house Candover is linked with taking a 25% stake in the firm,
valuing it at £3bn.
March: Towergate chairman and majority stakeholder Peter Cullum breaks off talks with
Candover.
April: Sells £100m of preferred ordinary shares to US listed hedge fund Och-Ziff.
May: Agrees first deal since calling off talks with Candover, trumping Giles for MacDonald
Reid Scott. However. A bigger move for all or part of Sterling Insurance Group is abandoned.
July: Towergate Financial raises over £100m to acquire regional independent financial
advisers. Funding for the deal is largely provided by The Royal Bank of Scotland, Lloyds TSB
Corporate Markets and Towergate management.
Mr Cullum admits that the acquisitive broking group had had "a very interesting meeting with
some US private equity guys" as it looks to make its first US acquisition.
September: Towergate looks to secure an extra £100m in borrowings by renegotiating its
covenants. Towergate currently has a £580m loan facility from HBoS and Lloyds TSB.
Synergy to enter high net worth
Synergy Insurance Services is set to launch into the high net worth market with its new
product, Synergy Private Clients.
Managing director Amanda Doran told Post that when the company launches the product on
20 October, it will target the high end of the motor, household and fine-art market, taking on
clients with policies worth a minimum of £3000.
"We would be delighted to provide cover to people who have yachts or private planes and
international property," Ms Doran said.
The company has backing from Inter Hannover, and has a capacity of £100m for fine art
alone. A major book of business is expected to come from St James's Place clients.
Synergy chairman Sir Mark Weinberg is the lifetime chairman of SJP.
Underwriting will be provided by HNW manager Emma Bennett, who the company brought in
from Hiscox. Julian Watson will also provide underwriting support.
The plan is to target Chubb on its underwriting expertise and Hiscox on service standards, to
create a solidified market leader, said Ms Doran.
UKRC releases draft of rehab standards
Stakeholders have until 21 November to influence the final shape of the UK's inaugural set of
standards for rehabilitation service provision, after the draft version was released for
consultation this week.
Creation of the voluntary standards was made possible following a £85,000 cash injection by
government (Post, 15 May, p4).
Written responses are now being called for by the UK Rehabilitation Council with the final
form of the standards planned for launch next spring.
Performance templates enabling service providers to easily demonstrate their adherence to
the five key standards (see box) - plus a 'light' version aimed at the man on the street to
explain the rehabilitation route map as well as how to find and assess a good provider - will
follow in the next few weeks.
Morag Heighway, rehabilitation standards consultant for the UKRC, promoted its strength as
a "plain English document", explaining the standards have a two-fold aim having adopted the
Department for Work and Pensions' own phraseology.
They are aimed at both the 'consumer' - the client or end-user; and the 'customer' - the
purchaser or commissioner of rehabilitation services.
She told Post the UKRC's 20-strong advisory group is confident that its five underlying
principles are correct, however, it does expect a need to "tweak the language".
"Accreditation of rehabilitation service providers is still a long-way off," she conceded. "But
these voluntary standards will create a culture of people wanting to demonstrate their ability to
meet them and thus attract business.
"Inevitably we will need to move to the next level in the UK but, by introducing these
standards, we are taking a big step culturally," she added.
FIVE STANDARDS FOR REHAB SERVICE PROVISION
Providers will be expected to provide evidence based on five underlying principles or
questions:
1. What does the service do?
2. What skills do you have to provide the service?
3. How do you deliver the service?
4. How do you protect the consumer and customer?
5. How do you make the service work?
FLEDGLING BODY IN FUNDING WARNING
The government's one-off cash injection of £85,000 will run dry by next spring, Mark Baylis,
deputy chair of the UK Rehabilitation Council, has warned, leaving the long-term future of the
fledgling body hanging in the balance.
As the UKRC's draft standards for UK rehabilitation service provision were being launched
this week, Mr Baylis admitted that two grants initially obtained - the £80,000 grant secured in
May from the Department for Work and Pensions, along with a further £5000 from the
Scottish Centre for Health Working Lives - are unlikely to stretch beyond the publication of the
standards in their final form.
"The money was a one-off and we are actively looking at other ways to fund the Council going
forward," he told Post. "We are looking for sponsorship to keep us going."
He explained that the aim for long-term funding includes membership of the UKRC, which
would entitle those members to vote on Council representatives and thus ensure it is a
democratically elected body going forward. "We are asking people to join and become
members - not just of the Council but of whatever we call the wider organisation in future."
Brit launches bolt-on rehabilitation service
Brit has launched a rehabilitation service as a bolt-on to its employers' liability insurance in an
effort to distinguish it from rivals.
The insurer has teamed up with Crawford Healthcare to launch the rehabilitation product,
which offers employers a hotline to call when one of their employees has been injured.
"Our helpline is ready, willing and able to take cases," said Stephen Roberts, head of UK
claims at Brit, who added the aim of the product was to get employees back to work quicker
through early intervention.
The service also covers the costs of retraining in the event an employee's injuries will not
allow them to return to their existing job.
It provides access to 300 hospitals and clinics countrywide and a monitoring service in which
a dedicated person will be responsible for checking in on the injured party to ensure recovery
is steady.
"A lot of time and money is lost where businesses don't have the resources or time to have
that monitoring in place," said Mr Roberts.
ABI in road safety call
The Association of British Insurers has called on the government to step up plans around
young driver regulation to make the roads safer. The ABI has submitted its response to a
consultation paper by the Department of Transport saying that the country needs "tough love"
measures and that the government proposals in the consultation need to go further.
Along with the response to the paper, ABI director Nick Starling was also set to speak to a
conference attended by MP Jim Fitzpatrick, Parliamentary Under Secretary of State for
Transport, on Wednesday. Mr Starling was due to say that the ABI would like to see the
introduction of a one-year learning period and a limitation on the number of young passengers
a new driver can carry in the vehicle. "We're looking at ways we can reduce the number of
casualties and we need to tackle the problems at source," added an ABI spokesman.
Pitts takes up job at Allianz
Tim Pitts has left Zurich to become motor schemes manager at Allianz retail division.
Mr Pitts will manage the underwriting development and management of all Allianz personal
motor broker schemes.
Mr Pitts was previously a regional underwriting manager with responsibility for home and
motor product lines at Zurich. He holds a CII diploma and has more than 20 years' insurance
experience.
Mr Pitts said: "I am delighted to have joined an insurer that shows such a commitment to the
broker market place. I'm looking forward to contributing to the innovation, development and
distribution of customer-focused products and solutions for the broker market."
Neil Walker, motor manager, Allianz Personal added: "I'm delighted Tim has joined us. He
brings a wealth of enthusiasm and experience to the role. Allianz is committed to the broker
market and with Tim's expertise we will continue to develop in this important area."
Zurich is still to replace Mr Pitts.
RSA: protect public data
RSA has said companies must do more to assuage the public's fear that their personal
information is not safe. The insurer conducted research that found 90% of people in the UK
did not feel their information - held by banks and retailers or online sites - was completely
secure. Its survey also found more than half of respondents had become more concerned
about identity fraud. Desmond Cross, director of retail at RSA, said: "Even seemingly 'small'
breaches in customer confidentiality can lead to widespread concern, and can have a
massive impact on both the company's reputation and the industry's as a whole."
Axa restructures division in push for number one spot
Axa's new commercial boss has moved to stamp his authority on the business with a
restructure of the division that he hopes will see it emerge as the leader among the "pack" of
rivals.
Anthony Middle, who took over as managing director of commercial lines intermediary earlier
this year, has brought in Keith Hector, formerly responsible for the insurer's personal lines
sales operation, as commercial distribution director.
However, despite Mr Hector's most recent role, Mr Middle was quick to talk up his qualities for
the senior commercial position, noting that he had worked in this sector before and "was no
stranger to this market".
Under Mr Hector the commercial business will be split into four customer-focused sections:
strategic partners looking after consolidator, network and national brokers; distribution
partners encompassing large independent brokers; commercial partners offering tailored
services for small to medium-sized regional and community brokers; and specialist markets,
focused on property owners and managing general agents.
These will be managed by Martyn Grime, Karen Osborne, Andy Halstead and Mike Philips
respectively.
When asked about whether this shake-up will impact the managing director of personal lines
Mike Keating's management of the Primary and Towergate accounts, Mr Middle commented:
"The strategic partners number 15 in total, and while Mike will continue to have board levels
relationships with Towergate and Primary, the day to day running of those accounts will fall to
Martyn Grime."
As to the number of 'commercial partners' Axa is looking to work with, Mr Middle explained
that it "had yet to settle on a number", noting there had been a lot of change in this market
segment.
Mr Middle also said that Dave Gill had been appointed customer delivery director assuming
responsibility for all Axa's trading and broker service delivery, a role that had previously been
split between him and Ms Osborne.
"I have been in this position for five months and what I see is a business on the up with real
momentum and these changes will continue that improvement across the piece so that the
customer's experience, as far as service is concerned, will mean we are ultimately better than
the rest," he continued.
When questioned about whether he thought the model would have to be reviewed again
within 12 months, Mr Middle concluded: "I am confident that what we now have means that
we are able to cater for the broker's needs in the changing environment, and that that will still
be the case for the foreseeable future."
Total faces £700m blast payout
Hundreds of claimants are set to benefit from a £700m payout after French oil giant Total
withdrew a key pillar of its defence in the Buncefield case.
Total is currently fighting a High Court action brought by insurance companies, businesses
and residents following Britain's biggest peacetime explosion in 2005.
The company conceded that the incident was a result of negligence by the supervisor on duty
at the time but had argued that only damage within 451 metres of the explosion was
foreseeable.
However, on Monday, Total said it would no longer maintain this position and that losses
should now be paid irrespective of distance from the Buncefield site.
Kennedys launched proceedings on behalf of a group of insurers, known collectively as
Buncefield Neighbouring Property Insurance Group, earlier this year. The group aims to
recoup costs after paying out to policyholders for damages incurred by the disaster.
Mike Penning, Tory MP for Hemel Hempstead, said: "It is fantastic news that justice has
prevailed. The ludicrous defence put forward by the oil companies has been withdrawn. The
only sad part is that it is nearly three years since my constituents had their lives devastated
and they have received no interim payments whatsoever because the oil companies were
disputing the case.
"My constituents have had their lives and businesses put on hold for three years, through no
fault of their own. They deserve to have been treated better. I urge the oil companies to settle
the outstanding claims as soon as possible."
Total has also settled a counter-claim against TAV Engineering, the manufacturer of a safety
switch that failed to shut down the pipelines automatically, on confidential terms.
The legal battle will now focus on the spat between Total and Chevron, joint owners of the
Buncefield depot's operating company, Hertfordshire Oil Storage. Total argues that Chevron
should share responsibility for the incident.
The court case continues.
Zurich’s pleural warning
The government is considering responses to its consultation into the legal status of pleural
plaques, asymptomatic scarring of the lungs that can indicate exposure to asbestos. Zurich
warned a decision to overturn the House of Lords ruling that made pleural plaques noncompensatable could engender a complete lack of confidence in the British legal system and
lead to greater anxiety for those with the condition. Henry Bermingham, president of the
Federation of Insurance Lawyers, said the squeeze on public finances could reduce the
government's willingness to back an education or compensation scheme for people with
pleural plaques.
Unfair fraud detection rates favour large insurers
Mihir Pandya, fraud manager at Allianz Insurance, called for the introduction of a "fairer"
measure of fraud detection rates within insurance companies.
Mr Pandya said the current technique that compares the value of fraudulent claims detected
by each company should be abandoned in favour of benchmarking fraud savings against
fraud risk, which would be less biased towards major insurers.
"Fraud saving is benchmarked on value rather than percentage of risk, which is unfair to
smaller companies," he said, adding that the method leaves little incentive for the claims
managers of larger insurers to improve strategies.
Mr Pandya suggested that in their willingness to continue using the value measurement,
claims managers of large companies are failing to adequately present the true size of the
fraudulent claims within their business while at the same time "appeasing their boards".
"The current method is not a true measure of success. Is there an element of selfpreservation among fraud managers?" he asked.
Mr Pandya said Association of British Insurers' figures had found that fraud makes up 5% of
the cost of claims, yet, he said, insurers' overall fraud detection rate dwindled at around 2%.
"Maybe business models aren't gearing up to deal with the impact of the fraud risk
increasing," he commented. "We have the resources and the talent but are not moving past
the 1%-2%."
Mr Pandya questioned the industry's ability to deal with an upturn in fraud risk and warned
that the figure could rise to 10% given the economic downturn and prospect of recession.
He suggested that organised criminals may use easily detectable fraudulent practices to
check fraud systems, adding: "The irony is we are saying we are making fraud savings and
behaving like clapping seals."
"I think (organised fraudsters) are testing systems and controls. The fraudsters have
undertaken their own fraud risk assessment."
Property insurance scams crackdown
Glen Marr, vice-president, financial crime, AIG, called for underwriters to work more closely
with claims staff to ensure fewer cases of property insurance fraud slip through the net.
In his call for a joined-up approach to tackling property fraud, Mr Marr said: "The insurance
industry is at a stage where it's pretty good at detecting fraud at the back end, where you can
demonstrate return and investment."
But he warned it has proved harder to demonstrate the value of implementing fraud detection
processes at the underwriting level.
Mr Marr said it was highly likely the current economic turbulence in which "people are losing
jobs and businesses are folding" will have an upward impact on fraud.
He added the industry has made considerable progress in reducing fraud at the high-value
claims end - for example, relating to large building fires - through the use of sophisticated
detection methods such as forensic investigation, which were improving all the time.
However, Mr Marr said insurers have been less successful at detecting fraud in other lines.
He commented that detection has been poorest in the small to medium-sized enterprise
business market, adding: "The SME market is the hardest area to detect fraud and it doesn't
get as much attention."
Mr Marr reiterated the need for a central database containing the details of fraudulent
tradesmen and policyholders to be made available to all insurers.
Tele-staff underused
Companies should do more to encourage staff to detect fraud, said a leading psychologist in
the field of insurance fraud.
Thomas Ormerod, a professor of cognitive psychology at Lancaster University, said he has
seen first hand how staff in insurance call centres are not given the opportunities or respect
they need to detect fraudulent claims.
"In one company they were called phone monkeys. It's not really productive to think of people
that way," he said.
Mr Ormerod added that people's natural instinct to detect a dodgy caller was also often
underplayed in favour of more high-tech measuring tools, such as voice stress analysis and
forensic phrase analysis. Although these are reputable tools that more companies should
invest in to help them detect fraud, he added that human instincts are also valuable.
"Companies should move away from the idea that there's a silver bullet but also recognise the
notion that there is a natural propensity to detect anomalies. Realising that is helpful," he
suggested.
Mr Ormerod, who has worked with the insurance industry for the past five years on fraud
issues, said staff should see something given back when they do find a fraudster.
"People are empowered to report and follow up fraud if they are rewarded," he concluded.
Motor fraud sexier than EL and PL
Fraudulent public and employers' liability claims are forgotten because they lack the
"sexiness" of motor fraud.
That was the view of Halliwells partner and head of fraud Damian Ward, who during a
workshop aimed at considering ways of addressing the issue, showed that per £1 in low value
EL cases, the cost to the industry was in fact higher than a comparable value of motor claims.
Mr Ward highlighted that for every £1 insurers pay in personal injury compensation, on
average they pay claimant representatives £0.37 in EL/PL claims and £0.38 in motor claims.
However in claims under £5000 this rises to £0.93 of every £1 in EL/PL claims compared to
£0.88 of £1 in motor claims.
Mr Ward also highlighted that there was work to be done as a third of personal injury claims
do not reach CUE PI, hampering the insurance industry's ability to combat fraud in this area.
Police forge ahead with fraud pilots
Detective chief superintendent Steve Wilmott outlined how the City of London Police was at
the forefront of efforts to combat insurance fraud.
He noted that following the government's fraud review it had been decided that it would be
beneficial for a lead force to offer a focal point for fraud investigations in the country and that
the City of London Police was in the best shape to do that.
This would work in alliance with the National Fraud Resource Centre, which manages a multiagency approach to fraud, offering people an opportunity to report fraud to a body other than
to the police; and the National Fraud Intelligence Bureau, which could assess and analyse
fraud trends to offer a nationwide picture of the problem.
Detective Wilmott noted that when he joined his force three years ago there were no
insurance investigations, too many silo-based investigations and insurers and police forces
were reluctant to work together.
In contrast, he added, the City of London Police now had 210 detectives and 35 support staff
investigating fraud.
Speaking about the lead force initiative, detective Wilmott noted that proof of concept data
sharing was due to start this month between a host of parties including the Insurance Fraud
Bureau and police, and that it hoped to begin a pilot in April 2009 ahead of going fully
operational in September 2009.
Mihir Pandya, fraud manager at Allianz Insurance, welcomed the formation of a national fraud
strategic authority, which he described as a multi-agency co-ordination between public and
private. He told delegates that the involved parties had identified 43 priorities within fraud that
it will address.
Its first priority, however, will be staged motor accidents, he said: "Because they have seen
what the IFB are doing and all the progress they have made, they view it as a good practice
model and they want to emulate it elsewhere."
KPMG: amateur fraud to rise
Companies must be proactive instead of reactive towards fraud, especially as calculating the
cost of it will be a mandatory part of Solvency II, commented David Hicks of KPMG.
He added this will be more important as the economy worsens and increased numbers of
ordinary consumers will be driven to fraud.
"It's a real problem and the credit crunch is crunching. Amateur fraud will increase," he said.
In order to battle against this, companies should take a wider view on how fraud occurs and
undertake a proper assessment of how much it costs them.
"It's a pre-requisite for Solvency II so the more scientific it can be done, the better," said Mr
Hicks.
He pointed to a study which KPMG undertook with the NHS. By understanding where the
most fraud seemed to be coming from - whether from agency workers inflating time sheets or
patients getting unapproved free prescriptions - Mr Hicks commented that the NHS was able
to save £811m and bring fraud down 60%.
Although he said that stopping fraud before it happens is "possibly the Holy Grail", he added
that the insurance industry as a whole must do more if it wants results.
"There will always be people doing fraud. Something needs to be done in insurance to get a
better handle on it and it should be more about fraud prevention rather than detection," he
concluded.
Extra funding not an issue, says IFB chair
Having reached its third anniversary the Insurance Fraud Bureau has reached a point where it
could damage the good work it is doing if it took on too many more cases.
That was the view of its chairman John Beadle who hailed its success of 200 arrests, 14
convictions and told delegates that it had 28 ongoing investigations on its books.
"We are now up to full capacity, that is as much as we can manage effectively given the
extremely complex nature of these investigations as some involve 4500 documents," he
added.
When asked by chairman Anthony Gould if the IFB would like more money, Mr Beadle
responded that in the future it may "revisit" its funding arrangements with its insurance
partners, but that it was presently not an issue, especially given that the economic climate
meant funds were tight.
Mr Beadle stressed one of the successes of the IFB had been in "managing expectations" of
police forces by concentrating on a smaller number of fraud rings, with the aim of taking the
main players out.
He contrasted this "more professional approach" to previous efforts by the insurance industry
to combat motor fraud which focused on the wider fraud rings and stretched its resources so
much it was not able to gather the necessary quality of information to bring about convictions.
Mr Beadle used the example of an operation in Holborn to show how this focused approach
was working, which involved 21 insurers, 60 motor policies, 93 personal injury claims and 67
active policies.
With its new found approach, he noted it now had the "willing engagement" of 11 police
forces. Mr Beadle also highlighted that the fact these rings are also involved in such other
crime areas as the supply of class A drugs and terrorist financing meant the police were
taking a greater interest in their fraudulent insurance activities.
Eastern European rings pose new problems
The Insurance Fraud Bureau has noticed a rise in the number of motor fraud rings involving
Eastern European drivers.
Chairman John Beadle said that the traditional profile of these fraud rings being carried out by
people of Asian or Middle Eastern descent was changing, and that much of the gains made
by these people from the EU accession states were being sent overseas.
DLA Piper teams join Kennedys
Kennedys is expanding its newly acquired Birmingham practice having brought in two teams
of lawyers from DLA Piper.
Radd Seiger, partner and solicitor Reena Suri have joined the firm from 1 October with a
further four liability lawyers joining as soon as they are released from DLA Piper.
The team includes Robert Welfare and Khalid Mahmood. Mr Seiger, Mr Welfare and Mr
Mahmood join as partners together with Philippa Craven who will be appointed as director of
occupational disease.
A team of professional negligence lawyers headed by Eamon Mooney will also join the
Birmingham office as a partner in the coming months. Mr Seiger will work closely with partner
James Shrimpton and the recently merged Davies Lavery team to continue to build on the
firm’s defendant liability practice in the West Midlands.
Nick Thomas, senior partner of Kennedys, commented: “This is further evidence of the trend
whereby insurance expertise is consolidating. More and more good people are knocking on
our door and saying ‘every time we read anything about Kennedys it seems you are singing
our song – can we join your choir’. We are now actively looking for more opportunities to build
on our regional strength following our recent merger with Davies Lavery."
Damages assessed as council allows trespass
Field Common v Elmbridge Borough Council
(Chancery Division - 27 August 2008)
The claimant, Field Common, was the freehold proprietor of the land. The defendant,
Elmbridge Borough Council, was the local authority and freehold owner of an industrial estate
lying to the south of the claimant's land.
Between the claimant's land and the industrial estate there was a private road; the defendant
laid a tarmac surface over the road and part of the claimant's land. This was done without the
claimant's consent and the claimant protested about the encroachment.
The claimant company issued proceedings for trespass. In 2005, judgment was given in
favour of the claimant and the judge ordered an assessment of damages on the basis that the
defendant was liable for its own trespasses and those of any other person whom it had
caused or permitted to trespass on the land.
One of the issues the court addressed was whether or not, based on the facts, the defendant
was liable for the acts of trespass by its tenants in the units on the industrial estate and their
own visitors.
In the assessment of damages it was held that, after the laying of the tarmac, the defendant
had not "caused" the tenants to trespass but "permitted" them to do so.
The relevant period for the assessment of damages was agreed to be slightly less than seven
years from the date - six years before the issue of proceedings to the date of the judgment.
The judge held that: the correct approach to take was to assess what the defendant at the
start of the seven-year period would, in fact, have been able to extract from its tenants for the
right to use the land for access; and the damages payable should be assessed on the basis
of a hypothetical negotiation for the right to use and license others to use the land.
Comment
This case encompasses several different legal issues of particular importance to local
government including torts, trespass, access, bridleways and damages. Although the
damages awarded were relatively small, the case is of significance in the way that the court
approached the assessment of damages in respect of the defendant local authority's trespass
on the land of the claimant company. - Helen Jones, BLM Cardiff.
Road accident victim case offers Ogden guidance
Crofts v Murton
(Queen's Bench Division - 5 September 2008)
Mr Crofts was injured in a road traffic accident while riding his motorcycle to work in June
2004. As a result of the injuries, he was left incapable of independent living and was cared for
largely by his wife. Expert evidence was adduced as to the reduction in life expectancy of Mr
Crofts caused by the injuries and the court accepted his life expectancy had been reduced by
five years. This was then subtracted from the government actuary's expectation of life figure
for a man of his age (31.7 years - 5 years = 26.7 years).
A major argument in the case then focused on which of the Ogden Tables should be used to
calculate the multiplier for Mr Croft's annual losses - table 1 (multiplier for loss for life where
life expectancy is impaired) or table 28 (multiplier for future loss over a fixed period).
The claimant submitted that table 28 was appropriate, stating that Mr Crofts' expectation of
life was a term certain (26.7 years). The defendant considered using table 1 appropriate
because the court had decided only how much his pre-injury life expectancy had been
shortened when compared to the average male of his age, rather than assessing exactly how
long Mr Crofts would live. The court agreed with the defendant, adding the reduction in life
expectancy to his real age and then using table 1 to calculate the multiplier.
Comment
This case provides important guidance for insurers on the application of the Ogden Tables. It
is fair to assume that, where medical evidence gives a reduction in life expectancy as against
the average male, table 1 is appropriate. However, where medical evidence goes further and
assesses how long an individual in a particular case can be expected to live, table 28 is
applicable. - Blake Solly, BLM Leeds.
Asbestos case raises issues
Richardson v G F Russell
(Queen's Bench Division - 6 August 2008)
The deceased died of mesothelioma. He worked as a plumber and heating engineer for the
defendant between 1975 and 1987. The issues were whether or not the deceased had been
exposed to asbestos by the defendant as alleged and, if so, if that exposure was in breach of
duty and made a material contribution to the cause of the disease.
The deceased had not provided a witness statement but his son and wife gave evidence that,
upon diagnosis, he told them that he had been exposed to asbestos by three employers
including the defendant. Exposure occurred when the deceased installed central heating: he
ripped out asbestos lagged pipes and boilers; chipped off lagging to perform maintenance;
removed asbestos based bath panels; and swept up asbestos waste. Prior to diagnosis, he
expressed concern when watching TV programmes about asbestos on account of his past
work.
At trial, the defendant disputed exposure, except for the very occasional cutting of flue pipes,
while evidence from a consultant engineer supported that denial.
The judge found the claimant's witnesses to be straightforward and honest. The defendant's
witnesses were found to be 'defensive' and 'in denial' about asbestos exposure at work. The
exposure was significant, so could not be considered to be de minimis. The claimant's
evidence on date of knowledge was 'unhesitatingly' accepted and exposure occurred
negligently.
Comment
This case reflects the difficulties that defendants face when seeking to deny asbestos
exposure in occupations where asbestos was historically commonplace. It is consistent with
the trend seen in Cox v Rolls Royce Industrial Power (India) (2007), where the deceased
gave a generic description of work in power stations rather than specifically alleging exposure
with a named employer, though the court was entitled to find that significant exposure had
occurred. - Barbara Hatton, BLM London.
Preliminary hearing denied
J, K and P v Archbishop of Birmingham and Trustees of the Birmingham Archdiocese
of the Roman Catholic Church
(Queen's Bench Division - 25 July 2008)
In claims for damages made by victims of historic sexual abuse, limitation should be
determined as part of a full trial rather than being dealt with separately by way of a preliminary
issue.
The claimants had brought claims for alleged sexual abuse by a priest between eight and 20
years after the expiry of the primary limitation period. They relied on the discretion in s33 of
the Limitation Act 1980 (which allows the court to permit a claim for damages brought outside
the three-year period if it is equitable to do so) to enable their claims to proceed. The
defendants sought permission for limitation to be dealt with by way of a preliminary issue prior
to a full trial.
Master Fontaine refused the application for a number of reasons: due to the degree of overlap
in the evidence relating to liability, quantum and limitation, it would be difficult to 'hive off' the
limitation issue and consequently there would not be any significant saving on costs; the
evidence to be given at a preliminary hearing would be distressing for the claimants and, on
the balance of probabilities, the risk of them having to give evidence twice was too great; in
exercising the s33 discretion, it would be hard for a judge not to consider the merits of the
claim, as there was a large amount of factual and expert evidence to consider in making that
decision; the potential costs savings (one day at trial) was not so large as to make it a major
factor; and the requirement to consider the s14 issues and exercise the s33 discretion in
respect of each cause of action favoured hearing all of the issues at a full trial.
Comment
It had been anticipated that this would be the approach taken in this case in respect of
limitation following the House of Lords decision in A v Hoare and Others (2008) in January
and this decision confirms it. However, it is a first-instance decision and it remains to be seen
if different courts will take a different approach. - Sarah Firth, BLM London.
Quinn to leave Giles in management shuffle
Consolidator confirms senior management appointments.
Giles managing director Michael Quinn is set to leave the business next year. He is being
replaced by Andrew Watson.
Another senior member of staff, Derek Gardner, who moved from finance director to the
broker's M&A team earlier this year is also leaving the business.
Gardner has been replaced by Paul Matson, a former finance director of Coral Bookmakers.
Giles also confirmed the appointment of Mark Chambers as its new deputy managing
director. He also joins from Coral Bookmakers, where he was recently finance director.
The departures will be seen as a blow to Chris Giles, chief executive of Giles, who has this
year purchased more than 15 brokers in an attempt to create a business with a gross written
premium of £1bn.
Giles has been in tough negotiations with a number of insurers over commission levels in
recent months.
Quinn is understood to have been central to discussions with insurers following the heated
talks. He joined Giles in 2003. Quinn declined to comment.
AIG UK chief vows to battle on as Congress investigates
insurer
Lex Baugh thanks brokers and risk managers for their support while former bosses tell
US politicians what went wrong.
The chief executive of AIG UK, Lex Baugh, remained upbeat this week as the insurer’s US
parent company confirmed that it would not sell the UK general insurance business.
As two former AIG chief executives, Martin Sullivan and Robert Willumstad, testified to the US
Congress on Tuesday about how the world’s largest insurer came so close to collapse, Baugh
issued a statement thanking brokers and risk managers for their support
Hank Greenberg, former chairman and chief executive, was also due to testify but pulled out
at the last minute.
Earlier in the week, AIG announced plans to focus on US property and casualty and foreign,
including UK, general insurance business.
Numerous other businesses will be sold, including stakes in AIG’s non-US life insurance
operations. AIG has already disposed of its 50% stake in London City airport.
Baugh said: “The announcement that the AIG group will move forward, focusing more closely
on property/casualty insurance, is very good news for brokers and clients in the UK. We have
had a great track record over the last 10 years and have grown the business by around
300%, servicing private individuals, SMEs and large corporate clients.
“Our focus now is to take the business forward. Even through this very difficult period, we
have had many examples of client and broker support. Leading brokers and risk managers
have been very thoughtful in their approach.
“We are in an excellent position to continue to serve our clients in these difficult economic
conditions, and we are looking forward to having some great discussions with clients ahead of
the January renewals.”
As Insurance Times went to press, two former chief executives were before the US Congress,
outlining the chain of events that led to AIG teetering near collapse before being saved by an
$85bn loan from the US government.
Speaking to investors in a conference call on Friday, AIG chief executive Edward Liddy
emphasised that the sale of assets was a “flexible process”.
“To the extent we have to borrow more from the Fed, we will realise more assets,” he said.
“The world would like this to be very formulaic and precise, but it requires a fair amount of
judgment and flexibility for us to do this well.”
Liddy also insisted that AIG was “doing very, very well in the marketplace,” adding: “Some of
our competitors are trying to take advantage of this situation, but we are holding our own.”
Buyers back AIG.
Insurance buyers are confident in the financial strength of AIG, according to a new survey.
More than two thirds (68%) of risk managers polled said they were very confident or
somewhat confident of AIGs financial strength, a survey by insurance information company
Advisen found.
But 71% of AIG commercial lines policyholders plan to get quotes from AIG competitors when
their policies renew.
Advisen predicts that AIG will compete vigorously to retain business, potentially intensifying
price competition in an already soft insurance market.
Quinn and AIG clean up in solicitors’ PI renewals
Irtish insurer estimated to have written cover for 4,000 law firms.
Quinn Direct and AIG were the big winners of market share as solicitors rushed to renew their
professional indemnity (PI) cover last week.
As the deadline for renewals passed on 1 October, some brokers reported that Irish insurer
Quinn Direct could have written cover for up to 4,000 law firms, representing about 40% of the
legal market.
Brokers said Quinn Direct had priced its business very competitively.
Quinn Direct was unable to confirm the 4,000 figure.
Meanwhile, AIG enjoyed a rush of business from the middle and lower end of the market
following the bail-out of its parent company by the US government.
Lex Baugh, chief executive of AIG UK, said: “In the solicitors’ PI renewals, we saw excellent
levels of new business and strong retentions.”
There appeared to be an increase in the number of firms unable to find cover, largely a result
of insurers distancing themselves from the perceived risks posed by smaller law firms that
undertake conveyancing.
Simon Lovat, divisional director of the UK professional indemnity division of United Insurance
Brokers, said the number of firms unable to find cover before the deadline was “more than
normal”.
“There are more than a dozen firms that approached us that have gone into the ARP
[assigned risk pool] and we are working with to obtain insurance,” he said.
“For some firms it was cheaper to obtain run-off insurance than to purchase new qualifying
insurance. This was an unusual situation that doesn’t always seem to make obvious
commercial sense.”
The ARP provides cover for firms that cannot get cover from qualifying insurers or cannot
afford the terms available to them. The cover, which is expensive, is underwritten by the
qualifying insurers in the same proportion as their share of the premium income from
compulsory cover.
A Law Society spokesman said the number of firms in the ARP last year was below 100. The
exact number of firms entering the ARP this time will be known in mid-November.
Marsh reported a widening gap in rates for solicitors’ PI between larger and smaller law firms.
While rates remained soft for larger firms, some practices with fewer than five partners and
sole practitioners involved in conveyancing were hit with premium increases of 100% on last
year.
Sandra Neilson-Moore, European practice leader for law firms’ professional indemnity at
Marsh, said: “It will financially damage very small firms. It is certainly not the Solicitors
Regulation Authority or Law Society’s fault. It’s a general economic malaise and it’s catching
these firms up.”
Zurich: don’t change pleural plaque law
Insurer warns government over House of Lords decision.
Zurich has warned the UK government against overturning the House of Lords ruling that
pleural plaques are not compensable.
The insurer said reversing the 2007 decision could engender a lack of confidence in the
British legal system and lead to greater anxiety for those with the condition.
The warning came as the government completed its consultation on how to compensate
those with pleural plaques, a benign condition caused by exposure to asbestos.
In Scotland, where the Lords ruling is not binding, the Holyrood administration is debating a
bill that would make pleural plaques compensable.
Claimant lawyers have urged Westminster to follow the Scottish government’s lead.
Martin Bare, immediate past president of the Association of Personal Injury Lawyers, said it
would be “inherently unfair” if victims in England and Wales did not get the same treatment as
those in Scotland.
However insurers, including Zurich, are planning to take legal action to prevent the Scottish
bill becoming law.
Insurers are keen to educate people about the effects of pleural plaques.
Steve Thomas, technical claims manager at Zurich, said: “Compensating individuals with this
benign condition would send the wrong message to people that they have something more
serious.
“The House of Lords accepted this medical opinion last year and unanimously agreed to stop
compensating the disease.
“If GPs and government embark on a campaign to inform and reassure people that this
condition is not going to lead to any illness,
it would significantly undermine any misconceptions and anxiety.”
New deal for e-repository
Service contract aids use of electronic claims system.
Electronic processing of accounting and claims in London got a boost last week as a new
service contract came into force, trade bodies have claimed.
The agreement for the Insurers’ Market Repository came into effect on 1 October and now
governs company, managing agency and broker users of the system.
The repository handles 2.9 million web requests a week, with 1,500 electronic claim files
added every day. It has 5,300 registered users.
Dave Matcham, chief executive of the International Underwriting Association of London, said:
“We are now well on the way to full use of electronic claims files by companies in the London
market. Acceptance of the new repository will accelerate this process and help ensure that
the system can live up to the demands that will be placed upon it.”
AXA hires more staff in commercial shake-up
Insurer acts on broker responses to improve market relationships.
AXA is adding more front-line staff after admitting it considered feedback from brokers when
restructuring its commercial department.
The move ties in with the appointment of Paul Meehan, former co-chief executive of Venture
Preference, as customer experience director in July, as well as the insurer’s effort to remodel
its branch operations.
Anthony Middle, managing director of AXA’s commercial lines intermediary division, said the
company was adding more resources to improve its relationships with brokers.
“We have listened to a lot of customer responses over the last year,” he said. “We did some
further research just understanding what the practical requirements are in our customer
segments.
“We are reorganising our teams that face our customers. They can go to a team of people
that they know and have a dedicated team of people ready and able to respond to them. As
we are adding people to the front line, we are making more people available to them.”
The insurer has created a new role, commercial distribution director, which has been filled by
AXA’s head of distribution, Keith Hector.
The commercial sales team has been split into four sections.
The strategic partners division, headed by Martyn Grime, will manage the accounts of
consolidators, networks and national brokers.
Large independent brokers will be dealt with by Karen Osborne, head of distribution partners.
Small to medium-sized regional and community brokers will be handled in its commercial
partners business, currently headed by Andy Halstead.
AXA has also announced plans for a new business unit. Middle said the team would be
“dedicated to supporting one-off opportunities”. He added that a head of the new business
unit was due to be appointed in the near future.
Other appointments announced by the insurer include Dave Gill as customer delivery director.
He will be responsible for AXA’s entire commercial branch operation. The insurer also said
Mike Philips would continue to head AXA’s specialist markets unit. The business’ underwriting
operations will now report directly into each business unit. Roy Watkinson will continue to
head the commercial underwriting business.
New team boosts Shoosmiths’ turnover
Shoosmiths has boosted its Birmingham income by 20 per cent just six months after hiring a
social housing team from Cobbetts.
Head of Shoosmiths’ Birmingham office Joel Kordan, who joined from Cobbetts’ Birmingham
pre-merger firm Lee Crowder in 2003, said: “There was a lot of pressure for the team to
perform, but they exceeded their targets six months after joining, as well as creating spin-offs
for the rest of the firm.”
Shoosmiths hired the 31-strong Cobbetts team along with its entire client list in March 2008,
offering lead partner Andy Ballard equity. Ballard subsequently made three additional hires.
Former Cobbetts colleague Simon Denslow left Shoosmiths after what is understood to be
differences over the restructuring of the housing team.
This came as Shoosmiths decided to open an office in Manchester to focus on mortgage
recovery work.
Reed Smith’s Birmingham office goes it alone
The Birmingham office of Reed Smith is to split with the firm and branch out on its own in a
bid to focus on the regional market.
The nine-partner office will operate as a separate firm under the name Hill Hofstetter as of
January 2009, headed up by Birmingham managing partner Chris Hill.
Hill said the move had been brought about by "Reed Smith's focus on bigger things. They
have got London, New York, Paris and Hong Kong. Where do we fit in?"
The new 25-lawyer firm firm will maintain links with Reed Smith and will continue to refer work
and share clients.
The announcement comes after three months of negotiations with Reed Smith global strategy
head Michael Pollack.
Hill, a corporate partner, insisted the split was amicable but added that he felt that
Birmingham had been low of the firm's list of priorities.
"They have got to spend their dollars somewhere. We are not at the top of the list," he said.
Reed Smith had merged with Coventry firm Warner Cranston in 2001 before deciding to move
the office to Birmingham in 2006.
One Birmingham partner, head of product liability Paul Llewellyn, will remain with Reed Smith
and move to the firm's London office.
Reed Smith Europe and Middle East managing partner Roger Parker said: "Consolidating our
UK presence is a sound move for the firm. We look forward to maintaining a good working
relationship with the Birmingham business and continue to work on some projects and some
clients together."
Firm breaks new ground by sending PI work to South Africa
Personal injury cases are to be outsourced to South Africa this week in the first trial of its kind,
the Gazette has learned.
Hertfordshire firm Underwoods has signed a deal with an unnamed practice to test whether
road traffic accident (RTA) cases that fall under the predictable costs regime can be handled
properly in South Africa. If the trial is successful, the firm will look to outsource around 2,000
cases a year.
Underwoods, which is acting as the firm’s agent, charges a flat fee of £500 per case. The
recoverable costs of RTA cases which settle pre-issue are £800, plus 20% of the damages
figure up to £5,000 and 15% of the damages between £5,000 and £10,000; for example,
£1,800 for a case worth £5,000. Even with a large referral fee, there would be a profit for the
firm.
The cases are being handled by Underwoods’ associate in South Africa, but if the operation
takes off, the firm intends to build its own practice there with at least 40 staff. It has set up
Underwoods South Africa, a registered South African partnership based near Cape Town.
Senior partner Kerry Underwood commented: ‘I am exiling the English legal system to a place
of safety where the work will be done by lawyers and controlled by lawyers and kept well
away from the banks and supermarkets.’
Underwood, who will be in South Africa to supervise the first tranche of work, is targeting
insurers to outsource further PI cases, and is close to another deal with a law firm to
outsource conveyancing. He said he had also received enquiries about commercial work,
which could be handled by South African practices under the supervision of his firm. He said
he is confident of bringing in more work on the basis that ‘we can offer a higher-quality service
because of a lower cost-base’.
Underwood pledged that the minimum qualification of the South African staff would be a law
degree.
Berrymans Lace Mawer is regulated by the Solicitors Regulation Authority and accredited to
quality standards ISO 9001 and Lexcel. This e-bulletin is designed to keep readers abreast of
current developments, but is not intended to be a comprehensive statement of law and no liability for
errors of fact or opinions contained herein is accepted. Please take professional advice before you apply
this e-bulletin content to your particular circumstances.
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