Posted 19 January 2015 by Donna Scully
Have recent reforms to the personal injury sector done enough– what more can be done?
The cost of motor PI claims fell by 33% during 2013, from £354m to £238m according to a report from the Institute and Faculty of Actuaries, showing that legal changes, most notably changes to the Legal Aid, Sentencing and Punishment Offenders Act are having the desired impact on motor insurance injury claims, but insurers are still calling for further action to tackle the compensation culture.
The 5% reduction in the average cost per claimant from £5000 to £4750 is definitely a step in the right direction however, it’s widely believed that further reforms to ban inducements, ‘care not cash’ whiplash initiatives and independent medical panels could make a greater impact.
The government’s latest measures to combat dishonest whiplash claims took effect on 1st October with fees for medical reporting fixed from around £700 to a flat rate of £180, making such reports far less attractive for the firms producing them, reducing potential for fraud. I believe this will also discourage ‘pre-med’ offers. It is still too early to see the effects of this change but for both insurers and claimant representatives it is widely anticipated that this will reduce the costs of PI claims.
Although psychological injury claims are on the rise whiplash claims remain the big problem in the industry. Whiplash claims in the UK totals 500,000 a year, with most of these believed to have been exaggerated or arrantly fraudulent. We’re now waiting for final details of the government’s next wave of reforms, independent medical panels, greatly anticipated to further reduce the cost of claims.
Aviva’s recent win under the ‘fundamental dishonesty’ clause is one of the first of its kind since the new rules came into effect in April 2013 and has marked a shift in the power balance in insurers favour. The clause allows a court to dismiss a personal injury claim if it is satisfied the claimant has been ‘fundamentally dishonest’ in the course of the case – even if the claimant might still have been entitled to damages.
We’ve seen exponential change over the last 18 months and there is still greater change afoot. Figures from the Ministry of Justice’s claims portal are now showing an increase in claims during 2014, from 67,000 in May to 75,000 in September, with more cases progressing to the MoJ’s ‘Stage 3’, potentially proceeding to court, rather than reaching earlier and often cheaper settlement. Perhaps an increase in the small track limit to £5000 could be a contributing factor in lowering claims costs?