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This article first appeared on ALARM, February 2023.
Councils are the UK’s largest employer and deliver vital publicly funded government services. They are acutely impacted by a broad range of inflationary drivers against a backdrop of reduced budgets and a potential reduction in services and resources.
Councils are well versed in ensuring they have robust strategies when assessing claims merits. It is important to continue to defend those defendable claims to ensure that misleading precedents are not made which will encourage additional claimants to bring claims.
Evidence gathering at an early stage remains a key tool in undertaking an appropriate cost/benefit analysis when deciding how to respond to claims. If liability is to be compromised, the council can then (if appropriate) focus on settling the claim early - reducing their spend on legal costs and potentially their spend on damages.
Local authorities should review their overall wider claim strategy frequently and specifically in response to any trends identified.
It is often important to put the claimant to strict proof as regards causation and quantum of their claim. This may be done by reviewing full medical records, raising questions with the medical expert, obtaining own medical evidence and keeping all social media platforms under review.
Consideration of potential fraud issues and knowledge sharing between authorities remains paramount to further control spend and behaviours.
Drivers of claims inflation
Excess claims inflation is the increase in the cost of a claim beyond that of ordinary economic inflation (which is calculated by the use of standard economic indices, such as the Retail Price Index (RPI), the Consumer Price Index (CPI) and the Annual Survey of Hours and Earnings (ASHE)). This has become a priority for local authorities, requiring immediate consideration to ensure business resilience and adequate claims management.
Major factors driving claims inflation include:
- Brexit
- Geo-politics
- The long-tail impact of the COVID-19 pandemic
- Fraud
- The #MeToo movement in addition to similar social media driven groups
- The cost of living crisis.
In 2023, these drivers will continue to impact public services in terms of availability of materials and workforce shortages which may impact the ability of organisations to defend legal claims.
Liability
A combination of a shortage of materials and increased repair costs may compound the completion of repairs in a timely manner, in line with a council’s policy and guidance. Departures from agreed risk assessment matrices has the potential for highways authorities to be exposed to an increased number of claims and/or make claims difficult to defend.
The County Councils Network reported in June 2022 that the “estimated cost of inflation for 2022/23 of 40 of England’s largest councils has risen by 92% in just three months since they set their budgets in March”. In response, these councils face difficult decisions: for example, whether to make unplanned reductions to services, such as new roads. Such decisions have the potential to lead to an increase in claims as a result.
Similarly, claims inflation is impacting housing and property damage claims where a lack of labour and materials has created significant problems. Housing disrepair claims are on the rise, exacerbated by the cost of living crisis, where an inability to heat homes heightens problems such as damp and mould, with consequent risk.
Housing disrepair claims do not fall within the fixed recoverable cost regime, so the costs paid to a tenant’s solicitors are not restricted. Equally this applies to subsidence claims. Councils should carefully review cost/benefit strategies given that building costs continue to increase, with substantial price rises for certain materials. This means that while evidence is gathered the value of the claim increases.
There are further societal impacts on service delivery resulting in a corresponding increase in claims and significant financial challenges. These include:
- More reliance on social services due to the cost of living crisis.
- Post-COVID-19 redundancies.
- An inability to find new employment or to remain in work as a result of long-COVID.
- Closures of schools.
- Pressure on mental health services that were already stretched.
Quantum
Delays during the pandemic in claimants receiving adequate rehabilitation or treatment results in a slower recovery and poor long-term outcomes.
There is the potential to increase claims cost for care requirements, loss of earnings, additional assistance for DIY and gardening, and ongoing private treatment and therapy costs.
In addition, a rise in general damages for pain, suffering and loss of amenity following the publication of 16th edition of the Judicial College Guidelines on 11 April 2022 reflects a rise of 6.56% in the retail price index.
An increase in work related stress, depression and anxiety has an interconnectivity with injury claims as there are often poorer recovery outcomes where claimants have an underlying mental health issue. This can lead to prolonged absence from work or an inability to work, which will significantly increase the overall claims value.
Labour and skills shortages have enabled employees (in some industries) to drive up their salary and benefits. Claimants working in these industries will advance greater past and future claims for loss of earning, fringe benefits and pension claims.
More generally, the increases in the National Living Wage from 1 April 2023 will also inflate claims for loss of earnings.
While there is much political debate as to whether inflation has peaked, many of the drivers referred to above will continue to impact claims costs.
ALARM is a not-for-profit membership association that has supported risk management professionals for over 30 years. They provide members with outstanding support including training, guidance and best practice, networking and industry recognition for excellence across risk management.
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Public sector
United Kingdom