One of the major concerns for the insurance industry looking forward in 2015 is industrial deafness.
Industrial deafness is the permanent reduction in auditory acuity associated with prolonged noise exposure over many years in certain types of industrial work.
The overwhelming consensus in the insurance industry is that industrial deafness claims are on the rise, with a marked increase over the last five years. Claimants are also coming from an increasing diverse pool of industries – logistics, food production and textiles industries join manufacturing and construction as the main offenders. However, the vast majority of claims fail. The Association of British Insurers (“ABI”) has supported calculations that around two thirds of claims are repudiated; certain firms have stated this figure is over 80%, possibly due to including claims that are rejected after initial investigations in their analysis. Whilst the exact percentages may be in debate, two things that can be agreed on are that the number of claims has risen dramatically and that the majority of these claims are repudiated.
Many point to the rise of claims management companies as the reason for both the rising numbers of overall claims and the rising number of poor quality ones (so called “claims farming”). Submissions are made incorrectly with information missing, and limitation issues are seeing many claims failing at the outset. Thus it can be said that whilst the volume of claims is increasing the quality of these claims may, in fact, be falling.
The rise of spurious claims is leading to significant costs burdens on insurers. Analysts have estimated industrial deafness is costing the industry £70 million per annum. Aviva for example has stated that for every £1 they pass on to claimants in compensation, they are spending £5 on legal fees.
It is clear that the industry, the government and the regulators will all have to work closely to deal with the problem of rising industrial deafness claims.
The following reforms have been proposed as a means of tackling the issue:
- Expanding the claims portal to include claims with multi-defendants, and possibly a stand-alone portal for deafness claims. It is hoped that this will reduce the 17 month average time it takes to settle claims.
- Establishing a panel of independent hearing loss experts and implementing industrial standard hearing tests to help reduce the number of spurious claims.
- Introducing fixed legal fees for industrial deafness claims in order to curb disproportionate legal costs. Many firms have backed this proposal, and the ABI reiterated the need for fixed fees in November 2014.
- Calling on the Insurance Fraud Task Force to recommend reforms to deal with the issue. The ABI will work with the taskforce to produce an interim report in March 2015 before the 2015 general election. Whilst changes to the way industrial deafness claims are handled are unlikely to gain momentum until after the election, the report will be a welcome development in this area and will add to the hopes of the industry that a lasting solution can be determined.