Claims reform and Its Impact on Business Viability

HOW WILL THE CLAIMS REFORMS IMPACT ON BUSINESS VIABLITY?

Each and every firm that is potentially touched by these reforms must understand and anticipate the range of impact and outcomes, based around Management Information and KPI’s. Those data sets must be honed and refined to give law firm management the tools by which to make strategic decisions going forward, without them firms are operating in the dark and the outcome may not be what they would like.

The biggest 2 areas of risk are:

1. REMOVING THE RIGHT TO RECOVER DAMAGES FOR RTA RELATED SOFT TISSUE INJURY IN CASES OF 0-6 OR 9 MONTHS DURATION, OR FIXING ALL SUCH DAMAGES CLAIMS AT £400-£425 (WITH PSYCHOLOGICAL ELEMENT)

With this kind of ‘either/or’ proposal, the full impact is likely to be vastly different. If the right to recover is abolished for injury lasting less than 6 or 9 months, the impact on these books of work will be high. The vast majority of low value, volume based RTA work will be caught by the proposals. All the correlated income will be removed from law firms, who ought to understand how that impacts their own portfolio. If the fixed sum approach is adopted, at either the £400 level or above, the impact will also be high, but some firms may have processes to be able to run the cases at either small profit or as loss leaders. Others should leave this part of the market.

Impact assessment: High Risk

2. RAISING THE SMALL CLAIMS LIMIT FOR ALL PERSONAL INJURY CLAIMS TO £5,000

This is the single largest threat to the profession to come from the proposed reforms. This may impact all areas of Personal Injury, or just RTA, which is still to be decided. Firms that have reliance on RTA work will be severely impacted. It is likely to mean the reduction of viable claims by a very high percentage, perhaps even 85%. The question for many Firms would be whether they can profitably run the cases on the back of the clients’ damages and success fee contribution. If the limit was to rise to £5000 in all areas, the impact on all personal injury firms would be as catastrophic, as for RTA only firms discussed above. The only personal injury practices that would be untouched by this proposal would be those only operating in the multi-track/high value personal injury segment of the market.

Impact assessment: CRITICAL High Risk