Speech by MASS Chair Simon Stanfield
MASS Conference, 11 October 2017
Welcome back Ladies and Gentlemen.
Last year I began my Chairman’s speech by saying that the Ministry of Justice could be publishing their plans on the future of whiplash claims at any time, and that I’d feared that they might have published their consultation paper on the morning of the conference.
In the event, they published it the next day….
As we are waiting for the Civil Liability Bill to be published, I’m half expecting that it will be published this afternoon, given my previous form!
You will not be surprised to learn that I mainly wish to talk to you today about the Government’s proposed changes to whiplash.
But first I would like to say a few words about the debate on the Discount Rate. The reaction to the change in the Discount Rate was as predictable as it was disappointing.
The previous rate was simply not adequately compensating seriously injured people for their future losses in the way the law intended.
Those innocent people unfortunate enough to suffer severe and life changing injuries deserve to have their compensation.
They need to be set at an appropriate level adjusted for the current economic environment.
These injured people deserve to be free of severe anguish and financial hardship in covering daily expenses, care costs or ongoing treatment.
The reality is that insurers have long known that the rate should be adjusted and could have taken appropriate steps for consumers.
Liz Truss took the right decision both legally and morally. It is a great shame for victims that lobbying from the insurance industry has not been resisted.
Whatever the final outcome of the review and legislation, I sincerely hope that the revised Discount Rate structure will protect some of the most seriously injured accident victims.
Behind all the debate about which formula to use and the parameters of the financial awards, there are real people each with their own tragic story.
There will be a chance to talk further about the Discount Rate this afternoon with Mark Hewitt of Rebmark.
Before I come on to talk about the Government’s proposals for the future, I would first like to touch upon some recent history that has shaped the claims market as it is today.
The Government is currently embarking upon a review of the LASPO legislation and this is due to be concluded by April next year.
The playwright George Bernard Shaw said: “We learn from history that we learn nothing from history”.
I fear that the MoJ have not learnt from the errors of LASPO and indeed the launch of MedCo.
Driven by one side in the debate, Part 2 of LASPO was misguided in its objectives, flawed in its rationale and poorly executed.
One of the main objectives of LASPO was to reduce costs for insurers so that insurance premiums could be reduced for consumers. The absence of the costs of success fees and ATE have indeed benefited insurers financially, but at the expense of accident victims, from whose damages they are deducted.
After a short period during which premiums did fall, they have increased dramatically hitting pre-LASPO levels again.
Accident victims rarely benefit from a 10% uplift in damages.
QOCS has undoubtedly been used by some legal practitioners, but it is often disallowed and there are a number of QOCS cases proceeding through the courts in an attempt to clarify their uncertainty.
Third party capture remains unregulated and is still a significant problem.
The related ‘fundamental dishonesty’ change has led to many genuine claimants coming under unfair pressure to cease a legitimate claim ahead of going to court.
PI cases involving children have been particularly hard hit due to the Jackson reforms.
The referral fee ban has made little or no difference to those that wish to retain such relationships.
There is also the wider impact of LASPO on the justice system and the reduction in legal aid to the detriment of access of justice.
And so five years on and it looks as if the mistakes of the past are about to be repeated in the form of the Civil Liability Bill.
Rushed initially in development, the Government’s proposals have now been impacted by multiple events including Brexit and its political fallout.
The legislation has been presented, abandoned for a general election, reviewed and reformatted and its introduction has now dragged on into the autumn.
On one level this delay has enabled legal firms to look again at their business model and consider how they might survive in a dramatically different future regulatory environment.
The delay has however also led to a great deal of uncertainty. Despite our best efforts though, if they do go ahead, what are the details of the new regime? How will it work in practice? When will they implemented? The full answer to these and many other important questions appears to be some way off.
The original October 2018 deadline will certainly be missed and we may still be some way off from full implementation of the final package.
Meanwhile, clearly a great deal has happened in the claims sector, and the wider political landscape, since the Insurance Fraud Taskforce published its twenty-six recommendations back in January 2016.
Some good progress has been made on many of the sensible recommendations from the IFT.
But in many areas action has been painfully slow.
The transfer of CMC regulation to the FCA and the prospect of tougher regulatory action against CMCs, of which I will talk more shortly, is either going to be slow or is meeting resistance.
We have yet to see the promised consultation on Part 2 of the changes, when abuse in medical reporting and rehabilitation costs need tackling. The government continues to struggle with getting a grip on the issue of credit hire and with the technology in cars getting ever more sophisticated, issues around credit repair and total loss claims are only likely to increase.
We need strengthened powers for the SRA to enable them to respond robustly to the fringe elements in the legal sector who facilitate fraudulent behaviour.
This is at a time when it is becoming increasingly clear how much the sector has changed since the landscape was surveyed by the IFT back in 2015.
The number of whiplash claims has continued to fall as the post-LASPO and reformed MedCo/medical reporting regulatory environment kicks in.
The number of CMCs and the revenue they make from encouraging personal injury claims has fallen.
We are approaching near record high levels of motor premiums, fueled by successive increases in the IPT, higher repair costs, the recent changes in the discount rate and probably a host of other factors. One thing is clear though, it cannot be blamed on increased legal costs.
Fraudulent behaviour – which never was at a level suggested by the newspaper headlines – appears to be on the wane, with many cash-for-crash gangs busted by the combined efforts of the various intelligence and investigative bodies.
All of this begs the question, what are the current proposed changes to the claims environment really for?
In 2015 the purpose was supposedly clear. It was to tackle and change fraudulent behaviour.
In the words of the former Justice Minister Sir Oliver Heald, the Government wanted to disincentivise minor, exaggerated and fraudulent whiplash claims.
Since then, tackling fraud has all but dropped off the Governments stated justifications for its so-called whiplash reforms.
Fraudulent behaviour does remain a problem, and it will only be tackled collaboratively by the whole industry across many fronts, but the programme proposed by the Government is not the solution.
MASS will continue to oppose the Government’s plans pointing out why the proposals are deeply unfair.
How they miss what should be the main targets.
How it has too many loopholes and gaps.
How it will result in an increasingly unregulated claims market with a range of uncertain outcomes.
Raising the small claims limit and the introduction of a ridiculously low fixed tariff system may indeed dissuade some claims, but it will come at the expense of legitimate claims for justice and a likely increase in fraudulent claims.
In the absence of professional legal support in many instances, with lawyers, in the cold calculation of the MoJ, finding “alternative economic activities”, an unknown number of accident victims will face several poor options.
First, they may choose not to pursue their right to compensation as an injured party, even though they have paid for this protection with their compulsory motor insurance premium.
Secondly, they may embark upon the potentially difficult path of self-litigation.
Solicitors are certainly not Luddites. We have fully utilised the new technologies that have transformed the legal sector over the last 20 years and recognise that the march to deliver more legal services online will continue at a pace, as it is in every walk of life.
Nevertheless, we have a number of concerns about how the new claims process will deliver the best possible service to LIPs without restricting the right to independent legal advice and access to justice.
The significant future role of the Portal and MedCo, as one part of the Government’s wider vision of the delivery of online legal services, will take time to get right as it is remodelled and restructured. The lessons of how MedCo was overly hastily set up must be learnt.
It is not yet clear how a revised Portal will deal with issues such as liability, resolving disputes of fact, causation, liability evidence, the complexities of the Road Traffic Act, court rules and protocols and evidence of financial loss.
A third option is that they will be drawn into the world of CMCs, embraced by the grateful arms of claims farmers eager to exploit their vulnerabilities.
We generally welcome the Finance Guidance and Claims Bill in relation to claims management services. We have long called for a full and complete implementation of the Brady Review’s recommendations.
MASS has in the past expressed some concerns over the transfer of the CMRU to the FCA.
The Government needs to ensure that the CMC regulator has the tools it needs to police the industry properly.
It needs the right powers granted in legislation and the financial resources to police the sector.
The CMRU has undertaken its role effectively within the limits it has operated within.
But with the Government about to open the door to CMCs in the PI market, it is essential that the regulatory structure for CMCs is robust and if necessary strengthened.
It is however disappointing that the Bill does not ban regulated CMCs from cold calling and texting about making a personal injury claim. Whilst we all know that it would not stop every call from the unregulated market or overseas, I’m convinced that it would have a major impact on the number of calls made.
With the Government seeking to create an environment where an increased number of claims will be driven by CMCs in the future, it is vital that the regulatory regime is robust and able to cope with these challenges.
We are, however, also aware that tighter regulation runs the risk of leading to increased levels of unregulated activity, either domestic or offshore, and so there is a delicate balance to be struck before the tipping point is reached.
Let me be clear. MASS remains opposed to the Government’s whiplash proposals and will continue to actively campaign against them in Parliament and elsewhere alongside other bodies.
We live in politically turbulent times and none of us knows what is around the corner. With opposition to the proposals growing within the Conservative Party, they have yet to be fully tested before a restless Parliament.
There is still so much more that we can do to fight these proposals and MASS will be there all the way.
This summer MASS, APIL, the Law Society and others were asked to join an MoJ Whiplash Reform Steering Group and its sub-committees looking at various practical aspects of the government’s programme.
We recognise that there is a value in having our views heard at the heart of the official process.
MASS has never shied away from dialogue, working to persuade, find common ground and workable solutions.
Our long experience of such matters has taught us that our knowledge and expertise can make a real impact at a practical level.
If despite all our collective efforts, Parliament does approve the plans, we will seek to limit the damage and disruption the proposals will cause, identifying and working towards solutions to practical, legal and technical difficulties.
Whatever happens, the next few months and years will undoubtedly be testing for the sector. Like all of my colleagues in the PI sector, I passionately believe that accident victims deserve all the protections and support that our legal system can offer. We must speak for them.