Claims handling

In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for Claims handling.

Key developments in 2022

The first full year of operation of the Official Injury Portal has materially reduced the volumes of work handled by law firms in the low value injury sector. In addition, there have been a number of decisions that have had an impact on the volume consumer litigation model by removing the ability to recover costs.  For example, in Warren v DSG Retail Ltd [EWHC] 2168 the High Court struck out the claimant's claim for breach of confidence, misuse of private information and negligence, leaving standing only a breach of statutory duty claim in respect of a data breach following a cyber-attack on Dixons Carphone.

The impact of lower volumes of claims being handled by law firms is likely to lead to an overall reduction in claims volumes against solicitors and other professionals in litigation over time. There are claims farmers continuing to look for consumer litigation that will deliver recoverable costs. But for now, it seems that legislation and the Courts have closed down access to costs recovery across a range of low value litigation against professionals. 

However, funding of litigation remains an area of difficulty and is likely to continue to produce claims against legal professionals. The decision of Mr Justice Foxton in Royal & Sun Alliance Insurance Ltd and Others v Tughans (a Firm) [2022] EWHC 2589 as to the scope of a professional indemnity insuring clause provide indemnity in respect of a success fee provided confirmation of the wide scope of the insuring clause. We understand that the decision is going to appeal. Insurers will be watching for the decision which will apply across many professional indemnity policies. 

What to look out for in 2023 

With the downward turn strongly predicted in the housing market we anticipate a wave of lender claims against solicitors and surveyors following housing repossessions. These will include a significant volume of properties that are owned as buy to let properties with sitting tenants. Whilst the government has stated its intention to ban no fault eviction for tenants within this Parliament, such legislation is not on the Statute books at the moment. It remains to be seen how this will play out for landlords and tenants. Unfortunately, though it seems likely that housing insecurity will increase for renters as repossessions increase alongside claims against professionals. 

For the first time in many professionals' working lives inflation will need to be taken into account.  For third party liability claims, the increased costs of expert advice and counsel will have to be factored into existing reserves. The further out the anticipated date of resolution for a claim, the higher the upward revision. For the first time in a long time interest will also increase the costs of claims resolution and interest will be a larger head of loss with potential to impact the settlement value of a claim.  Claims handlers will need to work closely with their panel lawyers to manage the inflationary impact and ensure that there are no nasty surprises to absorb at the resolution of claims. 

Written by Sarah Armstrong.

Download our full Annual Insurance Review 2023 for more insights.