The government has unexpectedly shelved its reform of personal injury claims – at least for now, it has emerged today.
This article first appeared in Legal Futures, 13th October 2016
An email to members of the Association of British Insurers (ABI) from James Dalton, its director of general insurance policy, seen by Legal Futures, said “the Secretary of State has decided she does not want to proceed with the reforms at the moment”.
The proposals, first announced in the Autumn Statement last November, would see the small claims limit for personal injury rise from £1,000 to £5,000, and the right to claim damages for low-value soft-tissue injuries removed.
But a subsequent statement from the Ministry of Justice (MoJ) indicated that the issue was not off the agenda. “The number and cost of whiplash claims remains too high, increasing premiums for ordinary motorists,” a spokesman said. “We remain committed to tackling this issue, and will set out our plans in due course.”
It is understood that the government feels that despite the reforms introduced to date to tackle the high number and cost of whiplash claims, the number of claims remains too high and it still intends to act.
The email from Mr Dalton said: “We have repeatedly been assured by officials within HM Treasury and the Ministry of Justice of the government’s intention to proceed with the reforms and the consultation. The acceptance by Sir Oliver Heald QC MP, the justice minister, to speak at the imminent ABI motor conference was a further clear indication that government remains committed to reform.
“We have now learned at very short notice that the minister will no longer be able to participate in next week’s conference. Furthermore, officials at the MoJ have told us that the Secretary of State has decided she does not want to proceed with the reforms at the moment.
“It is far from clear that the decision to delay these reforms, and the consequent savings for motorists, is unanimously agreed within government. On the contrary, it is our strong understanding that the decision not to proceed with the consultation has been taken by MoJ in isolation and that appetite to proceed with the reforms remains very strong within HM Treasury and among a number of influential MPs.
“We are in the process of picking up with officials at Number 10 to understand whether those at the very top of government understand the consequences of inaction on this issue.
“We believe that there remains significant support for these reforms within key parts of government and within the governing Conservative Party.
“We will continue to press for early progress and will be using the coming days, as well as the forthcoming motor conference and all party parliamentary group on insurance and financial service meeting on 25 October to strongly communicate through national and trade media the impact that MoJ’s decision not to proceed has on motorists.”
Neil Sugarman, president of the Association of Personal Injury Lawyers, said: “When news emerged in the summer that insurers had failed to pass on savings from previous personal injury reforms to motorists, it was clear that the proposed reforms were aiming at the wrong target.
“Car insurance premiums continue to rise while costs to insurers from personal injury claims are falling. It’s now time for the government to investigate the real reasons for rising premiums and hold the insurance industry to account.
“But there is no room for complacency. We will continue to argue that any reforms to the personal injury claims process must be based on independent evidence, rather than insurance industry rhetoric.”
A story today in The Times – which comes from the angle that the move has scuppered the chances of lower insurance premiums for motorists – said: “Ministers are understood to have told insurers that they are unenthusiastic about the proposals, leading the industry to conclude that they will never emerge…
“They claim that the ministry is less keen on the changes than [former Chancellor George] Osborne because of great resistance from the legal profession.
“A Ministry of Justice source said that the priority of the department, now run by Liz Truss, was the forthcoming prisons white paper. However, they said that the reforms devised by the last government are ‘certainly not off the table’, though they did not have a date for when they would emerge.”
In the ABI’s official statement today, which claims that “Ambulance chasers [are] laughing all the way to the bank”, Mr Dalton said the government must press ahead with its reforms “and not cave in to the vested interests of claimant law firms”.
He added: “The Ministry of Justice seems to be rowing back from much needed reform to the civil justice system that will save motorists up to £50 a year on average. The UK has one of the most abused systems in Europe and the reforms would tackle the excesses of the compensation culture.
“Without action, claims management companies will continue to nuisance call and text honest motorists encouraging them to make fraudulent and exaggerated claims through claimant law firms.
“Every day of delay costs honest motorists across the UK nearly £3 million. The plans are drawn up and ready to go so there is no excuse for not pushing ahead.”
Sue Brown, chair of the Motor Accident Solicitors Society (MASS), said: “We are of course pleased that MoJ are not pressing ahead immediately with its proposed package of damaging reforms that would have had a significant detrimental effect on the rights of the injured victims of motor accidents.
“However we must not allow this news to interfere with the work that is already under way to address some significant problems in our sector. Solicitors and insurers need to work together with government to address the scourge of fraud, prosecuting identified fraudsters and cracking down on cold calling.
“We also need to improve claims management regulation, implement data sharing between PortalCo and the Insurance Fraud Bureau, and continue the work of we are doing through MedCo to improve the quality of medical reporting.”
Donna Scully, a partner at claimant firm Carpenters and a former MASS chair, struck a similar note: “Now is the time for the whole sector to set aside its differences and work constructively together.
“We need to work on implementing the Insurance Fraud Taskforce recommendations, make MedCo work more effectively, improve the regulation of claims management companies, and talk about other areas where things can be improved to support genuine customers.”
Andrew Twambley, spokesman for pressure group Access to Justice, described the decision as “a victory for common sense”.
He continued: “There was no evidence that the reforms would work, and it was not clear whether customers would benefit in the form of lower premiums. Moreover, if passed into law, the reforms would have eroded the rights of millions of people access to gain redress for their injuries.
“Nevertheless, all sides accept that there is an incentive to get rid of cold calling, cut down on fraud and frivolous claims, and operate a more efficient claims process which has the customer front and centre.
“Access to Justice believes in a collaborative approach and urges insurers to take the opportunity afforded by the government’s decision to have constructive dialogue with us to improve the road traffic accident claims process. If the RTA claims market is dysfunctional, it is beholden on all those who work in the claims industry to collaborate and remove that dysfunction themselves.”
Ian Davies, a partner at defendant insurance firm Kennedys, said: “The decision may ultimately be a wise move. Insurers have many challenges ahead of them in a post-Brexit world. The claimant market has undergone significant consolidation recently.
“A period of calm, and dare I even suggest an opportunity for both sides to work together to find a mutually acceptable solution to propose to the government, may benefit all sides.”