The role of claim farmers
So where are all of these claims coming from?
The answer is that the majority are being professionally enabled by so-called ‘claims farmers’. Claimant lawyers, claims management companies and some medical agencies are aggressively pursuing potential claimants by spam texting, cold calling and canvassing on radio, social media and even at public events like festivals.
The attraction of NIHL for companies like these is that the claims are relatively profitable. ABI figures for 2013 show that where claimants received damages, these were on average £3,100, whereas average legal costs were £10,400. So for every £1 paid to a claimant, more than £3 went to their lawyer.
These excessive legal costs are largely due to the fact that NIHL claims do not attract fixed fees like similar claims such as whiplash and the majority fall out of the claims portal - a Ministry of Justice mandated website for processing certain types of personal injury claims.
Low success rates
As well as the steep rise in costs associated with NIHL claims, a key concern for insurers is that 65-70% of the claims are unsuccessful. The ABI puts the figure even higher, saying that of the 200,000 NIHL claims submitted since 2012, more than 80% have not been eligible for compensation.
A major reason so many claims are failing is concerns over the quality of audiology reports. These concerns stem from many audiologists being insufficiently trained and/or not being qualified ENT specialists. In addition, many tests are carried out in inappropriate environments, such as non-sound proofed hotel rooms.
The high number of invalid claims represents a significant drain on resources for insurers and, crucially, is slowing the whole system down, so that genuine claimants are having to wait longer for compensation.
Another emerging issue with NIHL claims is the increasing number of potentially fraudulent claims.
At RSA, we have invested in market-leading technology that uses predictive analytics and social network analysis to help us detect fraudulent claims across a number of lines, including NIHL.
We are also working closely with our industry peers to tackle fraud. We participate in a Fraud Forum started in March 2015. The group meets quarterly to discuss fraudulent behaviour and identification of fraudulent NIHL claims.
We support the ABI's recommendations
It is clear that the current system is not working. In order to make it more effective for genuine claimants – and to reduce the number of invalid claims – we support the ABI’s calls for:
- Fixed fees for NIHL claims.
- Updating the current Claims Portal so that more NIHL cases can be submitted through it.
- Extending the government’s Medco arrangements to NIHL claims, so that all audiology tests have to be carried out by an accredited audiologist.
We also believe that more needs to be done, including:
- Increasing the small claims track limit to £10,000 to reduce the overall legal costs associated with claims.
- Investigating the introduction of a decibel hearing loss threshold for NIHL, as is currently in place in the USA and Canada.
- Setting up a protocol between industry and claimant lawyers to speed up the settlement of genuine NIHL claims and improve the quality of the audiology examinations carried out.