Posted 20 July 2016 by Donna Scully
The MoJ whiplash proposals: there is a better way
The nation has understandably been gripped by the momentous political and economic events of the last few weeks: the referendum campaign, the Brexit result, resignations, the early economic fallout, political skulduggery and plots, leadership contests (some of which are still ongoing) and now a new Prime Minister.
With government treading water through the official referendum campaign, unable to make or publish significant policy decisions, we can expect the floodgates to open as the backlog of proposals, consultations and decisions is cleared over the coming days and weeks.
Lawyers have been waiting anxiously throughout this period for the Ministry of Justice’s consultation on its proposed whiplash reforms. Whilst this may seem a minor matter in comparison to national events, the consultation paper will signal the start of a process that may have a greater impact upon the legal and claims sector than Brexit ever will.
We may have a newly configured government, but I fear that the Ministry of Justice intends to plough on with its chosen approach regardless. The proof will be in the detail of course, but there is a danger that the consultation will be about rubber-stamping the proposals set out by George Osborne in his Autumn Statement last year, rather than looking at whether this is actually a good approach in the first place.
The sector really needs a genuine consultation, with an open and honest debate about what sort of system we wish to end up with. We should not be attempting to rush headlong down a path that is littered with dangers and potential pitfalls. We have already come a long way in reforming the motor insurance system in the last few years – the MoJ Portal & fixed costs, further reduced fixed costs through LASPO including a ban on referral fees, the end of recovery of ATE Premiums and success fees, and QOCS, AskCUEPI, ‘fundamental dishonesty’, MedCo, and more recently the assorted recommendations of the Insurance Fraud Taskforce and Carol Brady’s CMC review.
It is very unfortunate that the Government appears to have already chosen to proceed without properly assessing the success of these existing reforms, each designed to better tackle fraud, and some of which are still not yet fully implemented. Fraud is rightly an important issue across the sector and we need tough action against those who abuse the system. But it is profoundly more disturbing that the raison d’ȇtre for the reforms has morphed into Lord Faulks and others questioning the basic right to seek recompense for injuries and the need for independent legal advice. Condemning legitimate and reasonable claims as simply “unnecessary” challenges one of the basic foundations of our centuries-old legal system.
I have always taken what I hope is a pragmatic approach to changes in the regulatory landscape. There are serious problems that cannot be ignored. We can argue until we are blue in the face about the scale of fraud, but it is a problem for everyone and must be progressively tackled on many fronts. There are bad practices from solicitors and insurers alike that have the potential to encourage or perpetuate a culture where exaggerating or inflating a claim is somehow acceptable. We need strong enforcement of the existing regulatory framework to tackle the bad ‘enablers’, whether individuals or firms, which we in the legal community cannot deny exist.
I have genuine concerns about the future if the MoJ continues down this path. A system that refuses to compensate for some types of legitimate claims, but not others, threatens the very principles of our insurance and justice system.
No matter what information is provided for claimants, in the absence of independent professional legal advice and representation, Litigants in Person will either; struggle with the complexities of representing themselves, will tragically not seek compensation for their injuries at all, or they will be driven into the hands of Claims Management Companies.
I find the third option truly terrifying - the prospect of the advice gap being filled by CMCs and others. I strongly suspect that accident victims will continue to seek representation at the time that they need it most and will be prepared to pay for it out of their damages. It might not happen overnight, but this would set us down the road of US-style contingency fees. Vulnerable people who won’t otherwise be able to afford legal representation, being forced down the contingency path.
After every previous regulatory change in the market, CMCs and others have re-calibrated their business model, to be compliant amongst the better ones or to find loopholes and work-arounds for the rest. They adapt and survive to the changed regulatory landscape driven by greed and money not customer service. We can be quite sure that they are already thinking about how they might exploit the system being proposed. They will direct clients to use the Portal or use it 'as them' on their behalf.
They are already preparing for a rise in the small claims limit by employing, or even worse having self-employed, ‘McKenzie friends’ to look after and represent accident victims following accidents, taking a huge cut of their damages for the privilege. There is nothing particularly ‘friendly’ about people with no experience, no professional indemnity insurance and, perhaps in some cases, few morals, representing you after an accident.
Claims are not just going to disappear. If anything, they could increase in value to mitigate contingency arrangements. Perversely the number of claims might actually increase, together with the levels of fraud. And do any of us really want the prospect of more cold calling and more dubious marketing practices? Surely that is the last thing intended by the Ministry of Justice, but that is probably going to be the result.
There is a genuine debate to be had about what level the small claims limit should be set at. Whether it should be calculated on the basis of RPI or CPI? Whether the proposed increase is proportionate to the growth in damages since it was introduced? Whether other associated costs need to be taken into account? Better determining what are the levels of actual or suspected fraud?
Unfortunately, and with the proviso that we have still not yet seen the detail of the consultation, it doesn’t look as if the MoJ is willing to engage in such a frank debate. This would be a real shame. Past cross-industry measures have shown that so much more can be achieved by an open dialogue and collaboration to find real solutions to tackle fraudulent and other unwelcome behaviour. It may be too late to expect that the Government will change its direction, but I for one will not stop arguing that there is a better, more constructive way to find solutions to the problems faced by our sector.
Donna Scully, Carpenters