MASS Briefing Note
June 01, 2009
Third Party Capture
Briefing Note
Background
The Motor Accident Solicitors Society (MASS) is extremely concerned about the practice known as Third Party Capture, whereby the defendants’ insurer contacts the claimant (victim) direct to try and settle the claim, advocating it is quicker and cheaper to do so. However, in our experience, this is not in the claimants’ best interests and, in many, cases causes upset and anguish and can amount to harassment and, in some cases, bullying.
By way of background, this practice is allowed to occur because of the following:
• MASS was represented on the Ministry of Justice (MoJ) Claims Management Regulation Regulatory Consultative Group regular stakeholder meetings leading up to the Compensation Act which was to legislate the conduct of Claims Management Companies (CMCs), when handling claims and dealing with consumers direct.
• During these series of meetings, stakeholders were lead to believe that the practice of third party capture by liability insurers would be incorporated within the Act.
• This, however, ended up not to be the case, with the MoJ stating that the Financial Services Authority (FSA) had confirmed that they regulated liability insurers and ‘double’ regulation would not be desirable.
• Through our own investigation and by challenging the FSA, MASS believes that the FSA do not regulate this in practice and there are considerable ‘flaws’ in the current FSA Rules that insurers are supposed to adhere to.
• The rules governing this practice comprises of one small paragraph in the ‘Insurance: Conduct of Business’, which MASS believes is wholly inadequate, and are also more ‘guidelines’ rather than actual rules, not to be breached. The paragraph states:
• MASS challenges these ‘rules’ on the basis:
o Insurers do not have to treat a third party in the same way as their own customer (policy holder)
o Insurers only have to ‘have regard’ to three of the 11 Principles for Business
o This means that important aspects such as ‘Conflict of Interest and Customer/Client Interest’ do not have to be adhered to by insurers when dealing with claimants direct
o These rules and their omission from the Compensation Act have resulted in insurers being permitted to carry out ‘cold-calling’ because the FSA has taken no action to stop it. Solicitors and CMCs have very strict rules banning them from doing this under the terms of the Compensation Act and the Solicitors Code of Conduct.
• MASS has been lobbying both the MoJ and FSA to investigate this practice and put into place more effective regulation. MASS first raised the issue with the FSA in January 2007. It took them 8 months to respond and eventually in August 2007 the FSA requested ‘evidence’ of this practice. MASS supplied substantial evidence and a detailed letter in November 2007. Since then, and after MASS continually chasing, the FSA has, to our knowledge, done nothing. Whilst confirming that they do regulate insurers, they have accepted that the practice of third party capture does require further examination. To our knowledge the FSA has still not made any attempts to even question insurers on how they operate third party capture and has made no attempt to investigate, let alone prosecute, those where we have supplied specific examples of poor conduct towards the claimant.
• In December 2008 MASS submitted Freedom of Information Requests to the MoJ and FSA for details of what was discussed leading up to the Compensation Act and whether the FSA do regulate liability insurers for the practice of third party capture.
Main Points of Concern
MASS is campaigning on behalf of the victims of road traffic accidents, who are being especially targeted, to have this practice banned or regulated to a level whereby the victim is completely protected. This is because:
• Victims are not always offered the opportunity to seek independent legal advice or they are given misleading information about how solicitors will handle their claim (i.e. cost and time).
• Third Party Capture is taking advantage of victims, who are already vulnerable following an accident, many of whom are having to contend with the trauma of the accident and their injuries.
• Offers for injuries are often made without medical examinations to ascertain the full extent and degree of the injury and any short, medium or long term effects the injury may have.
• Insurers are effectively acting as Judge, Jury and Paymaster, providing the victim with no or little opportunity to obtain independent legal advice, despite the obvious conflict of interest which is inherent.
• Claims are frequently being under-settled, denying the victim of the service and compensation that they rightly deserve.
• The insurers primary objective is to save money – there is little or no regard for the victims best interests.
• Victims are often harassed by constant telephone calls and pressure to settle the claim quickly. In some cases representatives are turning up on the victim’s doorstep unannounced and uninvited.
• MASS has evidence that where minors (under 18’s) are involved in the accident, the parent or litigation friend has not been informed of the legal rights of the minor. Consequently that element of the claim is in effect being ‘bought-off’ with a disclaimer being signed and the parent unaware of the potential long term implications of doing so.
MASS Campaign - Aims and Action
• MASS believes that this practice should be banned or at the very least, regulated to a level whereby the victim is completely protected. In order to achieve this it is becoming very clear that we need to gain the support of MPs and the media, to pressurise the MoJ and FSA into changing the current Rules and ensure that insurers are either prevented from carrying out this practice, or have strict rules to abide by (as do Solicitors and CMCs), which protect the victims and enables them to obtain independent legal advice before settling their claim.
The Media
• MASS has been working with the BBC by providing case examples of claims that have been under-settled; an accident victim who has experienced insurer pressure and an ex-employee of Quinn Direct. We have also been able to explain in detail exactly what the problem is and how we are challenging the FSA who are seemingly doing absolutely nothing about this practice.
As a consequence of MASS’ evidence the BBC has recently featured third party capture on ‘BBC Breakfast’ (television) and Radio 4 ‘Moneybox’. If you missed either of these, the links below will enable you to see/hear them both.
BBC Links
http://news.bbc.co.uk/1/hi/programmes/moneybox/8086247.stm
http://news.bbc.co.uk/1/hi/uk/8086722.stm
http://www.bbc.co.uk/programmes/b006qjnv
http://news.bbc.co.uk/1/hi/business/8086929.stm
• MASS will be continuing to work with the media to raise the profile of this practice.
Political
• MASS also encourages its Members and the consumer to contact their local MP to raise the issue and gain their support in our campaign. An Early Day Motion has been placed (No. 1481) and we urge as many MPs to sign this as possible.
• MASS is continuing to challenge the FSA and MoJ and is currently awaiting responses from them for an Internal Review, following their inadequate response to our Freedom of Information Requests. We are also in contact with the Information Commissioner and will be providing him with further evidence of this unacceptable practice.
• The issue of ‘cold calling’ has recently been raised by Lord Justice Longmore in the Court of Appeal case ‘Copley v Lawn & Maden v Haller’ whereby he stated that "cold calling was inappropriate .... and it should be discontinued forthwith". Consequently we will be highlighting this to the MoJ that now even the Judiciary are unhappy with this conduct and were compelled to comment on it in the Judgment.
If anyone requires further information on this, advice or assistance in working with us on this campaign then please do not hesitate to contact Jane Loney on 0117 925 9614 or email: jane@mass.org.uk