Third-party capture or (third party assistance) is when an insurer deals directly with a person who has a potential claim against their policyholder, in order to investigate and settle the claim. Typically, an insurer offers a compensation payment to settle the claim directly to a third party, rather than settling through a legal representative for that party. This is mainly used for third-party motor claims. But sometimes it’s used in other types of insurance, such as employers’ liability.
Concerns therefore been raised by industry bodies and consumer groups that this practice could mean third parties do not receive fair and reasonable treatment and compensation.
The handling of all insurance claim by insurers, including third-party claims, is regulated under the Financial Services and Markets Act 2000. This means that an insurer’s conduct towards thirds parties must comply with the Financial Services Authority’s (FSA) Principles for Business which includes acting with integrity, due skill, care and diligence and observing proper standards or market conduct. These Principles of the FSA are fundamental obligations of firm under their regulatory system and breaching them will mean a firm is liable to disciplinary sanctions.
Trade Union Unite has highlighted insurers who tried to settle claims of injured people before they could obtain independent legal advice. One incident involved Zurich who offered £4,000 in full and final settlement for the case to eventually settle for £35,000.
APIL evidence includes a claim on behalf of bereaved parents who lost their 3 children in an RTA. They were original offered £21,000 for a claim that finally settled for £60,000.
Both Unite and APIL are concerned about insurance company representative’s cold-calling ‘third party’ victims after an accident.
A further example was when Kimberly Harrison suffered facial injuries when another car crashed head-on with hers in March 2008. She was surprised and angry to receive frequent calls from the defendant insurer the day after she left hospital. She states that the insurance company pressurised her into settling the claim and not to take it further.
She says once she had instructed solicitors, the defendant insurers even managed to obtain her medical records. They posed as someone working for her solicitor. She states “I had no idea insurance companies could behave that way”.
The ABI unveiled its voluntary code of conduct for members dealing with RTA victims. It was prompted by the government’s decision to slash fixed claimant costs for low-value RTA claim from £1,200 to £200 last April.
The significant reduction in claimant costs meant a likelihood that claimants will be left without legal representation.
ABI has produced a re-drawn set of principles after civil just reforms placed more emphasis on third party capture. The code aims to protect the interest of customers with a personal injury claim.
Under the code the insurers will:
• Ensure policyholders are made aware of their options when choosing a lawyer, including links the insurer may have with them;
• Emphasis the customers rights to choose their own legal representative;
• Not apply, or use firm who may apply pressure such as cold-calling on customers to claim;
• Not share personal information with a third party if they have said they would not pursue a claim;
• Ensure that third parties recommended to handle a claim will not increase legal costs for at-fault insurer.
The ABI has stated that his new code should ‘strike the right balance’ between customers ‘legal rights and their ability to file a claim within a system that does not encourage speculative or exaggerated claims’. Despite the ABI confirming that 15 insurers have signed this new code, there remains many more insurers who have not or are yet to sign this agreement. Additionally, the code is only voluntary and the claimant is at risk of being a part of the third party capture and subsequently in danger of being under compensated.
An accountancy firm PwC revised its forecast for the flooding costs in December and January upwards of £630m.
But considering recent reports and growing concerns about the impact of the flooding, the insurance industry believes the bill could treble by the time the floods receded.
The clean-up costs could lead to a 5% rise in building cover. The government also plan to introduce a ‘Flood Re’ agreement where insurance companies will be asked to pay the premiums for the high risk properties, through a levy of £180m a year, which is equivalent to £10.50 a year on all household insurance policies.
Household in the Thames Valley and West Country are likely to face a £1,000 increase in their annual insurance premiums next year. The increase in household insurance and claims on household policies may impact RTA claims. Insurers may now be looking to under settle claimant’s injuries even more.
Settlement offers made by insurers to third-party claimant should be fair and adequate and insurers should treat third-party claimant in an open and fair manner. Third-party claimant should therefore be fully informed of their right, including their right to independent legal advice and of the alternative to settling directly with the insurer.