UK: FCA Business Plan Says It Will Investigate Insurance Claims Inflation (Pinsent Masons Insurance Briefing: 2 May 2018)

Last Updated: 2 May 2018
Article by Colin Read, Nicholas Bradley and Alexis Roberts

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Welcome to Insurance Briefing - a fortnightly round-up of insurance legal and business developments with analysis and commentary from the insurance team at Pinsent Masons.

NEW REPORT: Pinsent Masons commissioned Meridian West to conduct a series of in-depth interviews with our leading banking clients. The report uncovers the realities of legal technology uptake by the major banks and highlights market best practice. Although developed in the banking sector, the report highlights a number of equally relevant issues for the wider Financial Services sector, particularly insurers.  For example, it examines understanding attitudes to legal technology; the maturity of legal technology; benchmarking the use of legal technology; challenges facing legal teams and their solutions and collaborative approaches to creating solutions. Access the report here.

FCA business plan says it will investigate insurance claims inflation 

LEGAL UPDATE: The FCA has said in  its business plan for 2018-19 that it will focus on regulatory work to prepare for Brexit, meaning that it has limited resources for new initiatives and projects in the next year or two. It will only undertake one new general insurance project, the assessment of claims inflation in insurance. This relates to the FCA's forthcoming regulation of claims management companies (CMCs) in spring 2019 and is designed to assess how far brokers and motor insurers are inflating claims through referrals to CMCs and keeping volume discounts from their own repairers. While there is plenty of activity in its recent Business Plan that impacts upon the general insurance industry, much of the FCA's work is current and ongoing rather than new, including IDD implementation; the wholesale insurance market study and assessment of value in distribution chains among others.

EU regulator to focus on insurance conduct of business harmonisation
The EU insurance regulator will focus its harmonisation efforts this year on conduct of business issues and supervision, according to a new report. The European Insurance and Occupational Pensions Authority (EIOPA) is backing supervisory convergence as a way of ensuring a high, effective and consistent level of supervision throughout the EU by granting a similar level of protection to all EU policyholders and beneficiaries, according to its 2018/19 supervisory convergence plan. Insurance law expert Iain Sawers of Pinsent Masons, said that firms would welcome EIOPA's prioritisation of conduct of business issues as part of its plans to increase supervisory harmonisation and consistency. "EIOPA's plan to develop a common supervisory tool box and culture and to encourage the widespread sharing of supervisory good practices will greatly assist insurance companies grappling with different regulatory frameworks in the EU. It is also encouraging to see the concrete steps EIOPA is preparing to take over the next year or two including visits to local regulators, running a programme of practice exchanges through bespoke workshops and integrating conduct themes into its supervisory handbook." 

Insurer must compensate solicitor after 'settling direct' with its clients
An insurer which offered to settle directly with personal injury claimants who had filed notices of their claims on the Road Traffic Accidents Portal (RTA Portal) must compensate the claimants' solicitors, who would otherwise have been entitled to costs by virtue of a conditional fee agreement (CFA). The UK Supreme Court, in a unanimous judgment, upheld the existence of what is known as the 'solicitors' equitable lien', which law firm Gavin Edmondson Solicitors was entitled to enforce against the insurer, Haven Insurance. It did, however, disagree with the way in which the Court of Appeal had attempted to "re-formulate" the lien to create a general principle protecting solicitors from any adverse interference with their expectation that they would be able to recover their costs.

PPI deadline driving up financial complaints
The 2019 deadline for complaints related to mis-sold payment protection insurance (PPI) is driving up the number received by firms, which have increased to their highest level in more than four years. Financial services contentious regulatory expert Jonathan Cavill of Pinsent Masons, said that although firms would be "happy that the end of the PPI mis-selling saga appears to be in sight, the increase in complaints would make things difficult for them in the short-term. In previous articles, we had commented how the PPI longstop date and associated FCA advertising campaign would bring a reciprocal increase in PPI complaints. This has rung true. We are also aware that many firms have felt the impact of the increased velocity of complaints on their complaints-handling teams and wider businesses...Due to the PPI advertising campaign, firms should consider that customers are becoming more aware of their rights to complain both to businesses and to FOS for non-PPI complaints generally. Because this increase in customer awareness, we can expect that in the future there is the potential for non-PPI complaints to increase off the back of this."

Arbitrator appointed on multiple related cases was not biased, court finds
The English and Welsh Court of Appeal (CoA) has dismissed a claim that an arbitrator who accepted multiple appointments from one party in an arbitration would be biased as a result. The court dismissed an appeal by oil and gas giant Halliburton against the appointment of an arbitrator, 'M', in a dispute with insurance company Chubb in a matter related to the 2010 Deepwater Horizon oil rig explosion. International arbitration expert Richard Dickman of Pinsent Masons, said the case demonstrated the potential tension between two of the fundamental principles of international arbitration: party autonomy and arbitrator impartiality.

Brexit and cyber attacks threaten EU financial system, say regulators
Brexit and cyber attacks are two of the "key risks to the EU financial system", the joint committee of the EU supervisory authorities (ESAs) has said. The potential for "sudden risk premia reversals", and risks around the "sustainability of investments" stemming from "climate change and the transition to a lower-carbon economy" were also identified in the committee's new spring 2018 risk report.The committee provides for cooperation between the European Banking Authority (EBA), European Securities and Markets Authority (ESMA) and European Insurance and Occupational Pensions Authority (EIOPA).A recent report by Pinsent Masons, found that the majority of the UK's biggest companies have already triggered Brexit 'no deal' contingency plans. Businesses that undertake comprehensive structured scenario planning around Brexit will be best prepared for the changes Brexit promises and to meet their duties to shareholders, Guy Lougher of Pinsent Masons said at the time.

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