Where there is blame there is a claim - Dissertation Example

?Where there is blame there is a claim An analysis of the growing compensation culture in the UK. DISSERTATION PROPOSAL Background interest information This research proposal discusses the compensation culture in UK. Reader will get the information about litigation system in UK. This proposal highlights what is the perception of the UK nation towards the prevailing compensation culture in UK? What is legal and overall cost associated with the compensation culture in UK? What is the implication of conditional fee agreements (CFAs) after the transition from legal aid? Whether this transition leads to increase or decrease in claim rates. And at the end what is the implication of this injury litigation system to the society? Brief rational statement Nowadays, compensation culture is a part of every economy. As long as consumers get aware of their rights, compensation culture has received more encouragements. Compensation culture has spread from US to UK. Because UK is an individualistic society and people are earning for they own, so they want recoveries of their losses, damages, illness and injuries. Therefore, this research paper will examine the growing compensation culture in UK. Overall research aims The overall research aim of this project is to examine the growing compensation culture in United Kingdom. This topic is usually highlighted in media, newspaper and journals that depicts that U.K is facing a 'litigation crisis’ driven by ‘cash hungry accident victims’ (Edward Harvey, 2008). The purpose of studying this topic is to find the conflict between the opponents and supporters of compensation culture in UK and how it is affecting the societies in UK. The aim of this research proposal is to study the compensation culture with respect to five dimensions that are total cost of compensation, perception of compensation culture, implication of conditional fee agreement, legal cost and implication of compensation culture to the society. Individual research objectives The issue of compensation culture is very complex. This paper has studied contradicting points towards the concept of compensation culture. This research proposal gives insight into the issue not from theoretical purpose but also from statistical purpose which gave us the meaningful information related to compensation culture in UK. Literature review will give us insight how litigation process works in UK, What are important factors of this process and what are the main drivers of growth in compensation culture in UK. Through this we can predict future trend in compensation culture in UK by analyzing perception towards this concept and its advantages and disadvantages. Proposed dissertation title Analysis of growing compensation culture in UK. Preliminary abstract Compensation culture has become one of the important parts of the every economy. It includes litigation culture. Compensation culture is complex issue and raises many questions regarding the benefits of this culture that whether this culture provides protection to the people against their losses and can they have compensation as their recoveries. The aim of this research proposal is to study the compensation culture with respect to five dimensions that are total cost of compensation, perception of compensation culture, implication of conditional fee agreement, legal cost and implication of compensation culture to the society. Literature review which is done in this proposal will give us insight how litigation process works in UK, What are important factors of this process and what are the main drivers of growth in compensation culture in UK. Through this we can predict future trend in compensation culture in UK by analyzing perception towards this concept and its advantages and disadvantages. The research is an applied research since it is going to investigate about the compensation culture in UK. The primary data will be collected through self-administered surveys The study population is employees of public and private sector organization who work in different business disciplines. Another group of population will include claim management companies. Proposed research methodology Research Type The research is an applied research since it is going to investigate about the compensation culture in UK. The primary data will be collected through self-administered surveys that will be communicated to sample elements. The collected data will be statistically analyzed utilizing Microsoft Excel. The study will intend to get the feedback of from employees of public and private sector organizations about the perception and trend towards the compensation culture in UK. We will also include claim management companies to see the perception from both the sides. That is our respondents will include those individuals who claim and those who resolve claims. For that, secondary data will also utilize to develop the proper survey questions. Study population The study population is employees of public and private sector organization who work in different business disciplines. Another group of population will includes claim management companies. The survey's questions will be structured to inspect the perception of respondents towards the compensation culture in UK, is there an increasing or decreasing trend in compensation culture in UK, are they getting any benefit from it , do they think that there is an increase in cost of claim , if its so, is this cost is justifiable. It should further define the shortcomings or benefits of the system if any. The use of means and standard deviation will assist in knowing the distribution of the overall research. Sampling Procedure The study sample will include employees from public and private sector organization and claim management companies. Most of the sample units will be professionals with bachelor degree educational level and higher, yet people with high school education and lower educational level will be given a fair portion of the study in the sample-size pie. The age range for the sample will be from 23 to almost 60 years with work experience that ranges from few months to 35 years. In addition, the sample will have both genders. The procedure in which the sample will be selected from the population is a probability design using stratified sampling technique. The reason for selecting the probability design is because of its universal acceptance, accuracy, and its outcomes can be generalized. Data Collection Technique We will use questionnaire survey to collect the data. It will be interviewee completion questionnaire and will be distributed to the respondents when they are available to fill up the survey. Questionnaire will include both close ended and open ended questionnaire. Sources Both primary and secondary sources will be used. Primary source will be used for getting data from employees and claim management companies through questionnaire. Although this is time consuming but it will provides accurate and up to date data .It is easy for researcher to manage this data in his own way in which he is comfortable. Secondary source will used for literature review, forming sampling, data analysis and research methodology. Through secondary source, information is gathered about compensation culture in UK with respect to perception about this culture, total cost of compensation, legal cost, implications of conditional fee agreement and implication for the society. Data Analysis The collected survey data will be checked and verified throughout the different phases (editing, coding, data entry and data analysis). When editing the data, the researchers will check and adjust for omissions and consistency which will make the data ready for coding and storage. Then, coding will be performed and the numerical scores will be assigned. Afterward, the data will be transformed to Microsoft Excel to perform the data analysis. The data analysis will include both descriptive analysis and inferential analysis. Inclusion of descriptive analysis will be intended to simplify the data and make them easy to interpret. Applied research type will end with a set of recommendations. Hence, the inferential analysis will be used to predict the trend in compensation culture in UK in future. Moreover, proportions will be utilized heavily in the data analysis part to estimate the proportion of occurrence, In other words, if one survey question is considered, then the proportion will give percentages of the different feedbacks of the respondents. The proportion is very valuable in giving a general indication of what the overall outcome of the study is. The central tendency with its three ways: Mean, Median and Mode will be utilized in assessing the data results. We have used both closed-ended questions and open-ended questions in our questionnaire. This is descriptive level study where we have identified research questions, objectives, indicators used to measure the concepts and how the indicators are quantified. The data analysis techniques will be applied later in the research project. Likert Scale are used for Questions, in which the respondents are asked rate the factors in term of importance, extent of agreement, satisfaction or willingness using a standard set of responses. Limitations Due to limited resources we have to select few public and private firms and claim management companies. We cannot reach out to all the all organizations due to limited time and money. Ethical concerns We will tell all respondents about true nature of research so that they can give information which is true and accurate based on their own experience. We will get respondents informed consent to fill the questionnaire before giving them questionnaires. There is minimal risk as we are not placing respondents under any excessive physical or emotional stress. We have also assured the privacy of respondents by ensuring that answers will be kept confidential. We have clearly stated the in-text references and bibliography. Preliminary literature review Compensation culture Compensation culture is frequently discussed topic by many sources. Articles, journals, research papers, magazines, official companies discussed this topic in a great detail. Different sources give different viewpoints. Some researchers say that there is no compensation culture in UK. Whereas some disagree to the absence of compensation culture and claimed that claiming rate is increasing year by year and it is affecting the economy in United Kingdom. Compensation culture is complex issue and raises many questions regarding the benefits of this culture that whether this culture provides protection to the people against their losses and can they have compensation as recoveries. On the other hand, presence of compensation culture makes the people to go for the compensation very easily, putting unsustainable burden on the business. According to Working Party Report of the Institute of Actuaries (2002), compensation culture is defined as “The desire of individuals to sue somebody, having suffered as a result of something which could have been avoided if the sued body had done their job properly.” According to Lee (2002), the term compensation culture can have many meanings. He suggested that compensation culture have the negative meaning that those who are involved in compensation culture are greedy and this act must be discouraged. Tort Law Tort law is related to civil wrongs in which civilians' claim for any damage, injury or death against another civilian and wants compensation for that. In tort law, a provision is given to the claimant against the negligent part for any harm, damage, death or injury and to have compensation for that particular loss. According to Silverman (2003) and Thomas (2003), instead of compensation culture the word "justice culture" should be used. According to Lowe et al’s (2002), compensation culture is a mean of distributing resources fairly and equally and Tort Law is providing a platform to make this task possible. Edward Harvey (2008) gives us the method to calculate total compensation cost. Compensation cost is a product of three factors The frequency of those accidents which results in claims. The number of those claims which are resolved successfully that is when the claimant receives the payment. The average amount which is paid to the claimant. Tort law in UK There are many developments took place in Tort system of UK. One of the major developments is the transition of legal aid and taking a new shape in the form Conditional Fee agreement (CFA). Conditional Fee agreement is working on "no win no fee concept" (Edward Harvey, 2008) .In 1995, conditional fee agreement was given authority to act as a funding unit against the claims. According to conditional fee agreement, the claimant will pay fee to the lawyer if and only if he/she wins the case. The purpose of this concept is to make convenience for those needy persons who cannot afford the fees of the lawyers otherwise. At that time the use of CFAs increases. By then, the CFAs didn't responsible for public funding or for legal assistance for injuries except compensation against diseases. During this period of transition, the claimant can have ATE (after the event insurance), which is the amount of legal cost the claimant beard, in the case if the claimant lost. According to Access to Justice Act, when the claimant wins the case, he or she can recover success fee ATE and legal fee from the defendant. Another development in the tort system of UK was to make amendments in claiming process, increasing the speed of case resolution and reducing legal cost at the same time. The transition of CFAs from legal aid gave emergence to claim management companies. Theses companies arrange lawyer, medical team and witnesses to deal with the case. Types of compensation Though there is no particular order or type of compensation in any literature but Edward Harvey (2008) mentioned some of the types of compensation which are as follows. Insurance Claims It is one of the basic and obvious types of compensation claim. Under this compensation culture, insurance provides recovery amount to injury against motor, liability against employers and liability against public. Compensation can also be given for financial loss including physical loss. NHS claims NHS claims are claims against diseases, damages or injury while performing their work. This type of compensation puts a burden on taxpayers because majority of the people are availing the opportunity of NHS claims. Not only public sector in UK but also private sector negatively affected from this claim. Because of these claims, many organizations removed care providers because of increasing claiming rates and expensive insurance premium. Increasing number of claiming rates against NHS doesn't indicate that compensation culture is strong in UK. Rather it is showing the other side of picture that is NHS care level is getting worst and because of this negligence, many incidents and accidents are occurring in the hospital. Some argue that it's not the sole reason that NHS is working inefficiently rather the tendency to claim and to get compensation is increasing than occurring rates of accidents. Local / Education Authorities In UK, most of accidents occurred at shopping centers, streets, highways or other public areas which give public the reason to claim against local and public authorities. Local and public authorities resolved this issue by careful monitoring of those areas where accidents usually occurred to provide safer environment to the public and to avoid compensation claims against such accidents. In schools both type of injuries are common: physical and mental. The trend of suing educational authorities for mental stress injuries of the students are increasing. Another type of claim against local and educational authorities is charging educational board for committing negligence and errors while marking of papers which can sometime ruin the educational career of the student. Moreover school trips are also the drivers of claims and hence become more expensive because of insurance premiums claimed by parents and students for the injuries or tragic deaths. Elements of compensation culture When we discuss compensation culture, we have to discuss five key and basic elements which includes the total cost of compensation (including the number of claims and claims cost), perception of compensation culture, legal costs, the impact of CFAs and the implications of compensation culture for society. Total cost of compensation According to Edward Harvey (2008), cost of compensation is defined as "total cost of Compensation to society measured as a proportion of Gross Domestic Product (GDP)". The basic purpose of cost of compensation is to determine the total cost of compensation of the organization and whether it is increasing or decreasing. To determine the total cost of compensation, we have to find out the total number of claims and cost per individual claim. According to Lowe et al (2002) that from 1996 – 2001, compensation claims cost in U.K was ?10 billion per year which is 1% of GDP. Lowe et al (2002) and Furedi (1999), both estimated that UK will be affected by compensation culture and cost of compensation will rise in future because of damages and law fees. There are also some evidences related to total compensation cost to GDP of UK in comparison to other countries in the world. According to Oxford Compensation Survey by Harris et al (1984), the claiming rates in UK are much low in comparison to US. According to Pearson Royal Commission (1978) in 1973, 250,000 tort claims was reported because of death or injury in UK. Source: Richard Lewis, Annette Morris and Ken Oliphant. Tort personal injury claims statistics: Is there a compensation culture in the United Kingdom? p.3 fig 1 From the above table, we can see that there is a 3% increment in total claim in the last five years. Source: Richard Lewis, Annette Morris and Ken Oliphant. Tort personal injury claims statistics: Is there a compensation culture in the United Kingdom? p.4 fig 2 Source: Richard Lewis, Annette Morris and Ken Oliphant. Tort personal injury claims statistics: Is there a compensation culture in the United Kingdom? p.4 fig 3 Above two tables give us the detailed information related to the increase in particular types of injury. There is decrease in number of accident claims. There is 5% decrease in total number of accident claims. Motor claims remain static. But employers and public claims decrease by 21% and 7% respectively. The reason that why employers liability decreases, because of traditional methods used in manufacturing process in motor industry that caused illness, injury or damages at work. But the there is a huge increase in number of disease claims which actually accountable for the 3% increase in total claims for the last five years. According to Compensation Recovery Unit statistics, increase in diseases claims is largely because of respiratory diseases. From 1990, 750, 000 claims comes from coal mining sector. It is said that, coalmining claims are the biggest personal injury reason in the world. Up till now, ?2.8 billion is spent on compensation and it is expected to increase to the amount of ?7.5 billion. According to Richard Lewis and Annette Morris, the reason of increase in frequency of claims is that now people or employees have deeper understanding of injuries. Employees got to know that which diseases or injury results from which type of work. That is why people know that road accidents can cause whiplash. So insurers said that most of road accidents claims comprise of claims for whiplash. Sometimes employees attribute symptoms as an injury and want to be compensated. Another reason for the increase in number of claims is that tort system has made it easy for the employees to be qualified for the compensation for their claims. Now the tort law becomes flexible in qualifying people to get compensated. Moreover, lawyers with specialization in personal injury also increases in UK that enable people to provided solid grounds for qualifying for the compensation. Another determinant of total cost of compensation is the cost per individual claim. According to Edward Harvey (2008), UK has much lower claiming rates than US. International Tort Costs as a percentage of GDP 1999-2003 Source: Edward Harvey (2008). “Does a Compensation Culture Exist in the United Kingdom? p 41, fig 2. Perception of Compensation Culture Perception of compensation culture of the involved party is very important. According to Williamson (2005) “whatever may be the actual likelihood of irresponsible litigation, many believe themselves to be at heightened risk of being unfairly sued.” According to The Constitutional Affairs Committee (2005-6), there is a common idea among the people that compensation culture is spreading all over UK. There fore it is essential to know the perception of public towards the compensation culture and to make the perception fair. AON (2004), which is one of the best risk management and broking organization, conducted a survey that includes 500 private and public organizations. Survey findings depict that increase number of people asking for compensation putting an extra burden on business which they cannot sustain. Survey findings also anticipated that cost of claims will increase in future which will have an adverse impact on business. According to Norwich Union (2004) survey, respondents say that now there is huge need of compensation than ten years ago. The reason respondents mention for the growing compensation culture in UK is because of individualism in UK and media influence. The survey suggested that norms and value in UK are changing and people have become more individualistic in nature. According to Levene (2004), compensation culture is now going to UK from US and its adversely impacting the UK economy. Because of media influence, the perception of compensation culture is directing towards the negative impact. People usually perceive compensation culture in which people can sue more easily and have compensation for their losses. And sometimes, compensation culture is also perceived as platform which makes payment easier to the claimant that’s why claiming rates are increasing year by year. Because of this perception, you can expect unnecessary claim from the people just for the sake of compensation payment. Implication of Conditional Fee Agreements (CFAs) Another key element of compensation culture is conditional fee agreements, which is the transition from legal aid. The Courts and Legal Service Act 1990 made Conditional Fee Agreements (CFA) which is known as ‘no win no fee’ arrangements. In 1995 CFAs were introduced as a funding framework for claims. According to this principal, the one who claims will pay fee in the condition of success. This rule make easy for the people who cannot bear the lawyers fees otherwise. According to Richard Lewis and Annette Morris, the transition from legal aid to CFA introduces claims management companies. “These organizations seek to guide a claimant through the process of obtaining compensation by organizing solicitors, medical experts and expert witnesses” (Lowe et al 2002). These companies heavily depend on aggressive marketing to create awareness about the purpose and working of these companies. According to Lowe et al (2002), CFAs encourage the compensation culture in UK because CFAs provide a platform to the claimants to prove their claims and get compensated. On the other hand, Fennet al’s (2005) says that impact of CFAs on society is minimal. There is no increase in claim rates as a result of introduction of CFAs. Lewis et al (2006) and Morris (2007) suggested that when there was transition from legal aid to CFAs, we haven’t witness increase in claim rates. However the purpose of CFAs was to encourage the justice to the claimants and overcome the hurdles which claimants had to face while getting compensation. Legal Costs Legal cost has a close relation with the above point that impact conditional fee agreements. It is said that legal cost is increasing which eventually increasing the total cost of compensation in UK. According to Pearson Commission statistics, legal cost that is paid by insurers has reached to 20% of compensation payments. Cane (1996) mentioned that tort system is costly because of high transaction cost. "It is shown that around 55p of ?1 premium is paid out and 45p is for administrative costs"(Cane 1996). According to Lowe etal’s (2002), more than one third of the ?10 billion compensation budget attributed to legal and administrative expenses in year 2001. Increased legal cost determines the inefficiency of the system. According to Civil Justice Council (2005), average legal costs of those cases which are presented in High Courts are 50% to 75% of the amount which claimant get as a recovery. One of the supporters of legal cost, Marshall (2003) justified the legal cost and said that legal cost is just equal to insurance administration expenses. He further says that ?1.5 billion is “the cost of the insurance industry administering motor insurance, which incidentally, exceeds the ?1.4 billion identified as claimant and defence lawyers’ costs” Marshall (2003) There is much debate over inverse relation between the legal cost and system efficiency. As legal cost increases, efficiency in system has become questionable. According to Cane (2006) increased expenses of the tort system is because of two reasons. First, insurance companies pay a huge amount of money to brokers and advertising companies to advertise, attract and create awareness of their insurance policies. Secondly, tort system wants to have deeper insight in the personal injury claims. Implication of compensation culture for society The debate over the compensation culture in UK is not limited to total cost of compensation, impact of Conditional Fee Agreements (CFAs), perception of Compensation Culture or legal cost. But we have to identify the implication of all these on society. That is how these elements of compensation culture is affecting the society. According to Lowe et al (2002), cost of compensation culture incurred is more than the benefits, although there is no justification for that. Constitutional Affairs Committee (2005-6) has figured out some disadvantages. They suggest that one of the major implications of compensation is that people have become more risk aversive, which can hinder and create obstacles in the way of innovation and implementing new and different ideas. According to Harpwood (2007), there is also a positive side of compensation culture. It will give the experience to the defendant and enables them to introduce safer practices that people can handle without any damages. Through compensation culture, society becomes more aware of their rights which are positive contribution by the compensation culture towards the society. According to The Better Regulation Task Force (2004) “prospect of litigation may have positive effects in making organizations manage their risks better, but an exaggerated fear of litigation, regardless of fault can be debilitating” Proposed timeline Tasks Literature Review               Questionnaire Formation               Survey on field               Survey completed               Data coding               Data Analysis               Findings and recommendation               Report writing               Report submission               Sample chapter outline Introduction Research Questions Research Significance Research Paradigm Research Objectives Survey Questions Data & Analysis Sampling Design Population Sampling Frame Sample Instrument for the Study Data Collection Data Processing Findings Conclusion Explanation and Reflection Appendix References AON (2004) Compensation and Blame Culture- Reality or Myth? Cane, P. (1996) Tort Law and Economic Interests. 2nd Edition. Oxford: Clarendon Press Cane, P. (2006) Atiyah’s Accidents, Compensation and the Law. 7th Edition. NewYork: Cambridge University Press Civil Justice Council (2007) Annual Reports. Furedi, F. (1999) Courting Mistrust. The hidden growth of a culture of litigation in Britain. Centre for Political Studies, London: The Chameleon Press. Fenn, P., Diacon, S., O’Brien, C. & Vencappa, D. (2005) Trends in employer’s liability claims frequency and severity. Paper presented at General Insurance Seminar held at the offices of the Association of British Insurers, London. Engle, R. F and C. W. J Granger (1987) ‘Cointegration and Error Correction: Representation, Estimation and Testing’, Econometrica, vol. 55, pp. 251-276. Edward Harvey (2008). “Does a Compensation Culture Exist in the United Kingdom? E.Harvey Fenn, P., A. Gray, N. Rickman and H. Carrier (2002) ‘The impact of conditional fees on the selection, handling and outcomes of personal injury cases’, Research Series No. 6/02, Lord Chancellor’s Department. Fenn, P., A. Gray, N. Rickman and Y. Mansur (2005) The funding of personal injury litigation: comparisons over time and across jurisdictions (DCA Research Report, forthcoming) Fenn, P., N. Rickman and D Vencappa, (2005). The impact of the Woolf reforms on costs and delay (DCA Research Report, forthcoming). Goriely T., R. Moorhead, P. Abrams (2002) More Civil Justice? The impact of the Woolf reforms on pre-action behaviour, CJC Research Study 43 Harris, D., Maclean, M., Genn, H., Lloyd-Bostock, S., Fenn, P., Corfield, P. & Brittan, Y. (1984) Compensation and Support for Illness and Injury, Oxford University Press Hand, James (2010). The compensation culture: cliche or cause for concern? Journal of Law and Society, 37 (4). Lowe, J., Broughton, J., Gravelsons, B., Hensman, C., Rakow, J., Malone, M., Lee, E. (2002) “Introduction” in Institute of Ideas, Compensation Crazy. Reading: Hodder & Stoughton, (2002) Lewis, R. (2005) Insurance and the Tort System. Legal Studies, 25 (1) p.85-116 Lewis, R., Morris, A. & Oliphant, K. (2006b) Tort Personal Injury Claims Statistics: Is there a compensation culture in the United Kingdom? Torts Law Journal, 14 p.158- 175 Mitchell, G., & Shah, S. (2002) The Cost of Compensation Culture. Report of a working party of the Faculty of Institute of Actuaries. Marshall, D. (2003) Compensation Culture. Journal of Personal Injury Law, 2 p.79-82 Marshall, J. (1976) Moral Hazard. American Economic Review, 66 p.880-890 Norwich Union (2004) Public Attitudes to ‘blame and claim’ culture revealed Pearson Royal Commission (1978) on Civil Liability and Compensation for Personal Injury, Cmnd. 7054- volume I, II, III- presented to parliament by command of her majesty. Peysner J and Mary Seneviratne (2005), The management of civil cases: the courts and the post-Woolf landscape (DCA Research Report, forthcoming). Silverman, T. (2003) “Justice Culture?” The Actuary, September, 24-25. Richard Lewis, Annette Morris and Ken Oliphant. Tort personal injury claims statistics: Is there a compensation culture in the United Kingdom? Tort personal injury claims statistics Thomas, G. (2003) Letter to the editor, The Actuary, October, 40. Edward Harvey (2008). “Does a Compensation Culture Exist in the United Kingdom?” Williams, K. (2005) State Fear: Britain’s ‘compensation culture’ reviewed. Legal Studies, p.499-514 Read More