Are lawyers to blame for driving up insurance claims?

Are lawyers to blame for driving up insurance claims?

EVERY month, about a dozen law firms bought just over 4,000 motor accident reports from the General Insurance Association (GIA).
Although the association has never resorted to calling them ‘ambulance chasers’, it believes there are some law firms here which do little else than pursue motor accident claims.

The GIA suspects these lawyers - tipped off by workshops carrying out repairs on damaged cars - buy the reports to get the details of potential clients.

To curb this ‘data mining’, the GIA decided last year to leave out some information, such as the contact details of motorists and the circumstances leading to the accident.

It had an immediate effect.

The number of reports purchased by the more than 200 law firms dropped from about 6,000 a month to about 2,500 a month.

The Law Society refutes the GIA’s claims. ‘We have clear rules against touting,’ a spokesman said.

Asked directly if the Law Society was aware of ‘ambulance chasing’ lawyers here, he said: ‘We don’t know if there is or isn’t.

‘We don’t have investigative powers. We can’t act unless there is an official complaint. If the profession needs to censure a member, it needs to have evidence, good evidence.’

And apparently, it has not received a single complaint backed by hard evidence.

The spokesman noted that it was hardly cost-effective for lawyers to look for business through the GIA accident reports.

‘I can’t speak for all law firms, but it doesn’t seem logical,’ the spokesman said.

GIA president Mr Teo retorted: ‘If it is not lucrative, why are they still buying the reports?’

It used to be that many claims were processed without going through lawyers and were settled between insurance companies.

These days, most third-party claims and practically all such injury claims are now filed through lawyers, said Mr Teo.

Their actions drive up the size of claims because the claimants need to cover their legal fees, said Mr Teo.

These claims make up an estimated 60 per cent of all motor claims.

Motor claims hit a record $741 million last year - almost double the sum for 1998.

By comparison, the vehicle population rose only 30 per cent in the same period.

But accidents do not have to increase proportionately with the number of cars, argued the Law Society spokesman.

‘Because with more cars on the road, you tend to get into more accidents,’ he said. People are also more aware of their rights today, he added.

Loss adjuster and private investigator Louis Amalorpavanathan said that some law firms find clients by handing out ‘warrants to act’ to workshops, which give them to motorists to sign.

This gives the lawyers the right to represent the insured party.

Mr Teo said: ‘Often, the dazed motorist does not even know what he is signing…he is led to believe that he is just signing authorisation for the workshop to file claims against third parties.’

Mincing no words, he said: ‘You spend so many years pursuing a law degree just to do this? It is such a waste.’

But does leaving one’s namecard and authorisation document at workshops constitute touting, which is illegal?

The Law Society spokesman said: ‘It is a fine line…If somebody thinks there is touting involved, give evidence. If we think there is touting, we will punish him.’

In any case, he said all parties must adhere to a Non-Injury Motor Accident protocol, which sets out strict guidelines on how claims for such accidents should be handled.

‘There is a regime in place for settlement, with suggested costs, which has not been changed since 2002. It was put in place in consultation with various parties, including GIA.

‘The whole idea is to encourage an amicable settlement within a fixed time frame,’ said the Law Society spokesman.

And the majority of cases are settled before going to court, he pointed out.

But must a lawyer be involved at all when a policyholder makes a claim?

The Law Society replied: ‘If you want to have your fair entitlement, then you should have legal advice.

‘We feel this complaint about lawyers pushing up claims is a diversion by the insurance companies. They should be more transparent about how premiums are arrived at.

‘If motor insurance is so unprofitable, why are the big players fighting so hard to win market share?’

Source : Business Times - 20 April 2009

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178 sign up for Singapore HDB lease buyback scheme

178 sign up for Singapore HDB lease buyback scheme

Govt may consider making option available to 4 and 5-room flats too

By OH BOON PING

THE Housing Board’s Lease Buyback Scheme (LBS) has attracted interest from some 178 households since applications opened last month, and the government may consider extending it to include four-room and five-room flats later.

‘Opting to join the LBS plan is an important decision which flat owners should consider very carefully.’

- PM Lee

Speaking at an LBS outreach session in Ang Mo Kio yesterday, Prime Minister Lee Hsien Loong said that opting to join the LBS plan ‘is an important decision which flat owners should consider very carefully’. ‘Therefore, it is more important to help them understand the scheme so that they can make an informed decision,’ he added.

The scheme, which aims to help the elderly monetise their flats, was first unveiled by Mr Lee at the 2007 National Day Rally.

Under the LBS plan, HDB will buy back the tail-end of a flat lease at market valuation, leaving a 30-year lease for the household.

So, for example, if a flat has a remaining lease of 70 years, HDB buys 40 years of the lease from the flat owner.

It pays market rate for the lease it buys and this money goes to the new CPF Life annuity in the flat owner’s name.

In addition, the government will also provide a $10,000 subsidy for anyone eligible for the scheme who signs up.

Some $5,000 will be paid immediately in cash, while the other $5,000 goes into the CPF Life annuity.

If the LBS lessee dies before the 30-year lease period is over, his family members who are sharing the same flat can opt to live there for the remaining lease period, or return the flat to HDB for a refund.

Also, if there are beneficiaries of his annuity plan, they will be given the full refund of the unused premium from the annuity plan.

Prior to yesterday’s event, HDB has conducted at least five other outreach programmes that ‘managed to reach out to about 81 per cent of the eligible households’.

This scheme is available to about 25,000 low-income households in Singapore, and is currently only for those aged 62 and above and who own two- or three-room HDB flats.

Of these, some 2,800 are in Ang Mo Kio GRC, and another 800 in Yio Chu Kang, said PM Lee yesterday.

He added that some elderly owners of four or five-room flats have requested to join the scheme, saying ‘this is something we can consider later on’.

Source : Business Times - 20 April 2009

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US banks must rely on markets first for more money - WASHINGTON

US banks must rely on markets first for more money - WASHINGTON

No automatic new funds for banks after ’stress tests’, signals Summers

(WASHINGTON) Banks in the US that have received billions of dollars from the government will have to rely on private markets if they need more money, National Economic Council director Lawrence Summers says.

‘The first resort for more capital is going to the private markets directly to raise equity,’ Mr Summers told NBC’s Meet the Press programme in remarks released yesterday.

His remarks signal that banks deemed in need of capital at the conclusion of government-run ’stress tests’ may not get additional funds automatically. US regulators are reviewing the biggest banks to gauge whether they have enough money to survive a deeper economic slowdown. A Federal Reserve official last week said that the stress test results are planned for release on May 4.

The US Treasury at the end of last month had allocated US$328.36 billion under the Troubled Asset Relief Program (TARP), leaving US$134.5 billion for additional capital injections.

Some of the biggest US banks are already planning to give the government aid back. Goldman Sachs Group Inc and JPMorgan Chase & Co both pledged this month to repay the TARP funds after posting profits that exceeded analysts’ expectations.

Mr Summers said that while the administration welcomes repayment, ‘we don’t want people to be paying back the government in ways that would put themselves right back in trouble, and leaving themselves with inadequate capital’.

For the top 19 banks, any repayment of TARP funds will have to wait until after the so-called stress tests conclude, a Treasury official said last week.

Separately, two of the Federal Reserve’s top policymakers defended the Fed’s emergency lending, saying that the programmes would not cause an inflationary surge or create ’significant’ risk for taxpayers.

Vice-chairman Donald Kohn, speaking at a conference last Saturday in Nashville, Tennessee, said that the Fed has loaned to ’sound’ borrowers and plans to disclose more about such credit. New York Fed Bank president William Dudley, speaking at the same event, said he was ‘not worried at all that’ a doubling in the central bank’s balance sheet to US$2.19 trillion would spur inflation.

The increased credit has provoked concerns that prices will surge. Central bank officials are ‘dramatically underplaying the risks and liability side of the balance sheet’, former St Louis Fed president William Poole said in an interview at the conference.

‘We are very vulnerable to an inflation explosion,’ said Mr Poole, a senior economic adviser to Merk Investments LLC in Palo Alto, California.

Former Fed chairman Paul Volcker said that Congress will probably review the authority granted to the Fed following the expansion in its assets.

‘I don’t think the political system will tolerate the degree of activity that the Federal Reserve, in conjunction with the Treasury, has taken,’ Mr Volcker, head of President Barack Obama’s Economic Recovery Advisory Board, said in remarks to the conference at Vanderbilt University.

Central bank officials are ‘underestimating the political forces they’re going to face once the recovery starts’, said Mr Poole, a contributor to Bloomberg News. — Bloomberg

Source : Business Times - 20 April 2009

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Venture capital takes a breather

Venture capital takes a breather

Credit crunch also pushes VC funds to change strategy, invest in more mature early-stage firms

By OH BOON PING

(SINGAPORE) Venture capital (VC) funds appear to have called a time-out as the worsening economic climate takes its toll on capital raising.

Some point out that VCs could be in for another 4-6 months of liquidity troubles, but that the next 2-3 years will be a great time to invest in early-stage companies.

Compared with the dotcom era, the funds have also moved downstream to invest in more mature early-stage companies - those more than five years old, market watchers have told BT.

Said Pierre Hennes, partner of Upstream Ventures: ‘The difference is that during the dotcom boom days, VCs were happy to fund pre-revenue companies with merely an idea, whereas now, VCs are looking for companies that are slightly more mature but still early- stage, with first products, first customers and some revenue in place.

‘Therefore, in a sense, VCs have moved downstream vis-a-vis where they used to play a decade ago.’

Johan Stael von Holstein, founder of incubator IQube confirmed that seeking funding sources for incubator companies is now a lot more challenging due to the credit crunch and falling risk appetite among many VC funds.

One of the biggest incubators in Europe, IQube now finds it hard to secure the resources to set up a new incubator in Singapore.

‘There isn’t enough interest among VCs for providing the seed funding for early start-ups now,’ said Mr von Holstein.

As the economic climate worldwide has worsened sharply, there is a rising trend of business angels banding together to work and invest as consortia. As a group, angels are able to fund larger ventures than they can do individually. Thereby, angels are filling part of the void that VCs left behind as they moved downstream.

So far, the VC funds that have been hit hard by the downturn include those that are still in the process of fundraising. Funds which are planning to exit their investments this year - for example, through initial public offerings (IPOs) - are in the direct line of fire, said Eugene Wong, managing director of Sirius Venture Consulting.

Some point out that VCs could be in for another 4-6 months of liquidity troubles, but that the next 2-3 years will be a great time to invest in early-stage companies.

The reasons cited include cheap valuations, easy availability of talent in the job market and lower opportunity costs.

Said Mr Hennes: ‘Returns to early-stage venture funds, particularly those coming on line now - if they were lucky enough to close before the turmoil - are uncorrelated to current market conditions, as the returns to these funds are 3-6 years down the road.’

In Upstream’s case, it expects to benefit more from the downward valuation pressure on start-ups, as it is a new fund. ‘Our companies are likely to be exiting at the point where the market is back on an upswing,’ said Mr Hennes.

As VC funds often have a time horizon of 5-7 years, new deals that come through now may yield handsome returns when funds exit them a few years later.

Already, a number of VCs in the United States are investing in many industries, especially in the area of clean technologies such as alternative energy, recycling and power conservation. And in South-east Asia, China and India, VC interest is now shifting to domestic consumer plays such as retail and food & beverage, as well as businesses that generate positive cash flow and do not have much debt.

As the price-earnings multiples for China and India become less attractive, explains Mr Wong, Singapore businesses may see rising interest from the VC segment, especially in the small-cap space. ‘There are still many good entrepreneurs in Singapore, with innovative ideas and the potential to expand globally,’ he said. ‘Singapore firms also tend to have better corporate governance and transparency.’

Contrary to global trends, the VCs here are primarily looking at early-stage companies (up to five years old), partly due to increased funding support by the government.

Indeed, Mr Wong notes that there are now more VCs and more funds invested in the early-stage space compared with five years ago.

In contrast, resources for later-stage companies are generally shrinking, even though Mr Wong sees more investment opportunities there. ‘This is because there are no new VC players, and existing VCs are not raising more funds in this current market.’

Source : Business Times - 20 April 2009

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