The real plaintiff lawyer costs in personal injury claims...The real plaintiff lawyer costs in...
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The real plaintiff lawyer costs inpersonal injury claims
Jason Kroeger, SIRA & Kenneth Chua, EY12 October 2016
sira.nsw.gov.au
• Background & Regulation
• Claims Cost Disclosure Portal
• Scheme Efficiency
• Detailed Findings
• Further Developments
OutlineThe real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Background & Regulation
Jason Kroeger, SIRA
12 October 2016
sira.nsw.gov.au
• Prior to the Claims cost disclosure project the State Insurance Regulatory
Authority (SIRA), had no knowledge or transparency of legal costs being
charged to the claimant from their legal provider.
• In 2008 the SIRA engaged an external firm, to review a sample of
individual claim files to assess the full extent of legal costs
• Despite the review confirming some of the anecdotal evidence, the review
was on a sample of only 56 claims across 25 law firms
• In October 2015 the regulation was amended to allow the inception of the
CCD project
BackgroundA long standing issue
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
• To regulate the maximum recoverable costs for:
• legal; and
• medico- legal services provided in relation to motor
accidents claims
RegulationKey function of the regulation
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
• To ensure that transaction costs relating to motor
accidents claims do not unreasonably contribute the cost
of CTP payable by NSW motorists
RegulationRationale for regulation
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
• 23 (1) The object of this clause is to enable the Authority
to obtain information about costs in order to advise the
Minister as to the efficiency and effectiveness of the
motor accidents scheme under the Act.
• 23 (2) It is the duty of a legal practitioner who represents
a claimant when a claim is finalised (regardless of whether
damages are to be paid to the claimant) to ensure that
the Authority is provided, in the manner and time
approved by the Authority, with a costs breakdown in
relation to the claim.
RegulationClause 23 (Oct 2015): Determining efficiency of the scheme
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
• 23 (3) The duty in sub-clause (2) applies to all claims
regardless of whether the claim is exempt from
assessment under section 92 of the Act or whether there
has been contracting out under clause 8 of this
Regulation. However, the duty does not apply to a claim
in a motor accidents matter if the claimant incurs no legal
fees in the matter.
• 23 (4) If a barrister and a solicitor act for a claimant, the
duty in sub-clause (2) falls on the solicitor and not the
barrister.
RegulationClause 23 (Oct 2015): Determining efficiency of the scheme
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
• 23 (5) The Authority may provide any information
contained in a costs breakdown to the Minister and may, if
directed to do so by the Minister, publicise statistics
produced from any such information. (6) The Authority
may forward to the Legal Services Commissioner any
information obtained under this clause.
RegulationClause 23 (Oct 2015): Determining efficiency of the scheme
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Claims Costs Disclosure
Jason Kroeger, SIRA
12 October 2016
sira.nsw.gov.au
Claims Costs Disclosure The Claims Costs Disclosure Process
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Stage 1
• Insurer creates claims record
• Insurer sends the claims records to SIRA
Stage 2
• SIRA validates entry
• Email prompt to lawyer
Stage 3
• Lawyer completes “intelligent” form
• Submits to the Authority
Stage 4
• Incomplete
• Follow up emails sent
Claims Costs Disclosure
• Prior to the Claims cost
disclosure project the SIRA,
had no knowledge or
transparency of legal costs
being charged to the
claimant from their legal
provider.
• This made it impossible to
ascertain to the full or total
efficiency of the NSW CTP
Scheme.
The view of the NSW CTP scheme – prior to CCD
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Holistic View of the NSW CTP Scheme Prior to the Claims
cost Disclosure Project
ClaimantBenefits
Claims Costs Disclosure
• We (SIRA) have now received
over 6000 claims cost
disclosure submissions from
the claimants legal
representatives.
• Based on this data we (SIRA)
now have a much more precise
picture on the total scheme
performance and the legal fees
charged to the claimants by
the claimants lawyer
The view of the NSW CTP scheme – currently
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
The Current Holistic View of the NSW CTP Scheme Post
Claims cost Disclosure Inception
ClaimantBenefits
Legal costscharged byClaimantLawyers
• The data provided to us (SIRA) is the missing information
about claims – specifically how much the claimant
received, and what the lawyer received for managing the
settlement.
• This information has enabled SIRA to advocate for
changes to the scheme to ensure the funds provided to
the claimants is spent on rehabilitation and compensation
and not divided or swallowed up in legal cost.
Claims Costs Disclosure All payments are now accounted for
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Scheme Efficiency
Kenneth Chua, EY
12 October 2016
• The chart shows the efficiency
of the scheme since 2000
before and after adjusting for
the estimated total legal
plaintiff cost is shown in the
diagram
• Efficiency is a measure of how
much of the premium is paid to
claimants
• By using the results from CCD
analysis, we are estimating a
reduction in scheme efficiency
from 52% to 45%
Scheme efficiencyImpact of legal cost adjustment on scheme efficiency
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
37%
52%
11%Other
Scheme Costs (37%)
Claimant Benefits
(45%)
Legal & Investigation
Expenses (18%)
Scheme Efficiency: Before and After Adjustments
Detailed Findings
Kenneth Chua, EY
12 October 2016
• Analysis was based on the CCD data extract as at 1 August 2016 (except for Law Firm
Under Review which was based on CCD extract at 29 March 2016).
• June 2016 PIR data was used
• We have decided to use all the CCD data in our analysis (excluding claims not matched
to PIR), which produces a lower result for the extent of legal costs
Detailed FindingsData used
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
• Legal plaintiff fees are split in the following components:
• Regulated costs - Legal Plaintiff payments visible in settlement negotiations and
reported in the Personal Injury Registry (PIR) data received
• Contracted Out fees – This is additional legal plaintiff payments not captured in the
PIR, but disclosed in the CCD. This was previously unknown.
• The table below summarises our findings from the CCD analysis
Detailed FindingsResults from CCD database
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Contracted Out Fee % Regulated Cost Fee % Total Legal Plaintiff Fee %Total Legal &
Investigation Fee %
10.4% 10.3% 20.7% 28.0%
Cost as a % of Claim Size
69%
13%
9%
4%
2% 2% 2%
Legal Plaintiff Cost Breakdown
Solicitor fees inc party/party
Barrister/counsel fees
Medico-legal specialist reportsincluding allied health
Other e.g. interpreter, traveletc.
Other expert fees paid
Attending GP, specialist reportsand clinical notes includingallied health
Previous lawyers' fees
• Majority of the costs goes to
solicitor fees, with the % of
claim cost increasing as
claim size decrease. This
trend is also apparent for
Medico-legal specialist
reports
• Barrister/counsel fees is the
second largest cost, with the
% of claim cost increasing as
claim size increase.
Detailed FindingsBreakdown of total legal plaintiff cost
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Detailed FindingsLegal plaintiff cost by claim size band
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
0%
5%
10%
15%
20%
25%
30%
35%
40%
< $50k $50k -$100k
$100k -$200k
$200k -$500k
$500k -$700k
$700k -$1M
> $1M
% o
f cla
im s
ize
Claim Size Bands
Total Legal Fee by Claim Size Bands
Total Legal Plaintiff Fee as a % of Claim Size
• The table below shows how legal costs vary by:
• Injury severity
• Whole person impairment (WPI) based on modified AMA 4
Detailed FindingsLegal cost by injury severity and WPI
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Injury Severity, WPI threshold Total Legal Plaintiff Costs % Legal Defendant Costs % Investigation %
Minor, WPI <=10% 29% 8% 2%
Moderate/Serious, WPI <=10% 24% 7% 2%
Minor, WPI >10% 16% 4% 1%
Moderate/Serious, WPI >10% 14% 5% 1%
Cost as a % of Claim Size
• Law firms exhibiting high interaction factors with some medical service
providers were selected and analysed separately to rest of the law firms
• The table below is extracted from the CCD, which outlines the difference
between the law firms under review and other law firms
• Of all total claims, law firms under review make up 20% of claim count (9%
of total payments).
• Majority of the claims for them are minor severity claims (85% by claim count), while other law
firms have 65% of claim count that are minor severity claims
• The number of claims handled by these law firms has approximately tripled over the period of
2011 to 2015
Detailed FindingsCCD extract Law firms under review
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Law Firms Proportion by Claim Count "Contracted Out" Fee % PIR Regulated Cost Fee % Total Legal (Plaintiff) Fee %
Law Firms under review 20% 16% 14% 31%
Other Law Firms 80% 10% 10% 20%
Cost as a % of Claim Size
Further developments
Kenneth Chua, EY
12 October 2016
• In the NSW CTP scheme:
• Monitoring of efficiency in the scheme
• Identifying areas for investigation
• Legal cost regulation reviews
• For other personal injury schemes:
• Raise awareness of the full extent of legal costs
• A roadmap for implementation of a similar arrangement
Future developmentsFuture development and uses for the CCD
The real plaintiff lawyer
costs in personal injury
claims
12 October 2016
Q & A
Jason Kroeger, SIRA
& Kenneth Chua, EY
This presentation may contain information that relates to the regulation of workers compensation insurance, motor accident third party (CTP)
insurance and home building compensation in NSW. It may include details of some of your obligations under the various schemes that the State
Insurance Regulatory Authority (SIRA) administers. However to ensure you comply with your legal obligations you must refer to the appropriate
legislation as currently in force. Up to date legislation can be found at the NSW Legislation website legislation.nsw.gov.au.
This presentation does not represent a comprehensive statement of the law as it applies to particular problems or to individuals, or as a
substitute for legal advice. You should seek independent legal advice if you need assistance on the application of the law to your situation.
This material may be displayed, printed and reproduced without amendment for personal, in-house or non-commercial use.