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Whiplash report: Transport Select Committee of the House of Commons.

The Transport Select Committee's report on the cost of motor insurance in whiplash claims has been published. Nigel Teasdale, DWF's Head of Motor who gave evidence to the Committee on behalf of FOIL and Simon Denyer, Strategic Legal Development Partner review the report, highlighting the key findings.   

The background

The Transport Select Committee of the House of Commons is made up of 11 MPs with a political balance, five being Conservatives, five Labour and one Liberal Democrat. The Chair of the Committee is Louise Ellman, Labour MP for Liverpool Riverside. The report is the Committee's third on the cost of motor insurance, and in it they have focused on whiplash claims in particular.

Claims data

The CRU figures for the year ending 31 March 2013 showed for the first time a decrease in the number of new notified motor claims by 9.5% to just under 750,000. The Committee noted additionally that the number of whiplash claims had fallen for the second year running, by 13.8% and was now at a figure lower than at any time since at least 2007/08. The Committee recommends that the government analyses pre 2008 statistics on road traffic accidents to show how the number of whiplash claims has changed going back to the beginning of the 21st century. It says that it is concerned about the trend for the number of claims for other types of injury to increase as the number of whiplash claims decline, and recommends that the government provides a breakdown (no doubt again from CRU figures) of other types of motor injuries with an explanation of trends. They think that this sort of data will enable more work to be done on fraudulent claims, and by highways authorities on road safety issues.

The Committee questions the statement from Helen Grant MP, Secretary of State at the MoJ, that the UK is "the whiplash capital of the world" without factual data to support it, and thinks it surprising that the MoJ has been bringing forward measures without being able to give even an estimate of the comparative scale of fraudulent or exaggerated whiplash claims.

The Committee also recommends that the government press the ABI to provide better data on fraudulent or exaggerated injury claims to provide a stronger evidential base for policy changes.

Premium costs

The report refers to what were, when it was written, the latest statistics from the AA British Insurance Premium Index which showed average quoted premiums for motor insurance had fallen by 34% over the 12 months to April 2013. Since then, we now of course have the latest data from the same index which shows in the words of the AA that the average Shoparound quote for an annual comprehensive car insurance policy fell to £594.86 dropping 9.8% from £659.53 in July 2012. The Shoparound quote is an average of the five cheapest premiums. There will no doubt be many reasons for the lower premium levels. The success achieved so far in the ongoing battle against fraud will be one of them. Another will be that whilst savings are unlikely to have worked through to the bottom line yet, there will be anticipation that the recent process reforms will reduce claims costs over the next 12 months.

The report makes reference to the summit hosted by the Prime Minister with insurers on 12 February 2012, and also to insurers' commitment to pass any costs reductions from the process reforms through to consumers in the form of lower premiums.

The Committee recommends that the government explain how it will monitor whether lower premiums are in fact achieved, and also advises government to take a more strategic approach bringing together the various actions being taken by the MoJ, the Department of Health, the Competition Commission as well as the Department for Transport itself. The Committee is also keen that there should be more transparency about insurers' business models in the motor sector, alleging that currently they "remain as opaque as ever".

 

On the subject of the PM’s insurance summit, and remembering the Committee's political balance, it may be unsurprising that the Committee expresses disappointment at hearing the complaints from claimant lawyers that they were not invited, nor are they having substantive contact with ministers in the Department for Transport. While they do not say so directly, they appear to want to encourage greater dialogue, though it is unclear whether the encouragement will be sufficient for that in fact to happen.

Small claims track limit

The report's recommendations in this area have been keenly awaited, as potentially influential on the MoJ's decision-making not only in whiplash and motor claims, but across the wider remit of injury claims generally. While insurers are likely to be disappointed by the Committee’s views in this area, they do not of course represent government policy.

While the Committee says that they accept there are good arguments for raising the limit to £5,000 for whiplash claims, they do not support the recommendation. They accept that the SCT limit for injury claims which has been at £1,000 now for 22 years cannot be left at that level indefinitely, but see it as too early to make a change.

One concern they have is that they think that the government should carry out further analysis of the latest changes to the Portal before any change is made. They do not think the impact of the Portal on claims volumes and costs is yet clear and see it as still relatively new.

They think that increasing the limit is likely to cause access to justice issues, and believe there will be issues of confidence on the part of individuals trying to represent themselves in what might be seen as a complex and intimidating process where insurers will be using lawyers on the other side. They seem to have accepted the view of claimant lawyers which may not in fact be an accurate one that the limited fees available through use of DBAs may keep claimant lawyers away from SCT claims, and instead are concerned that claims management companies might move into the area.

They are also worried, they say, that one of their aims of discouraging fraudulent and exaggerated claims will in fact be affected adversely by any raise in the limit which in that light they would see as counter productive, as the SCT would not be a suitable forum to resolve cases of that type.

If the SCT limit were raised and whiplash claims fell within it, then they say the MoJ should consider how litigants in person could be assisted to use the process, and how the expert evidence could be dealt with within it.

Where does this leave us on the important question of a potential increase in the SCT limit for all injury claims? While the government may not necessarily listen to the Committee’s views on the SCT limit, perhaps it has to be accepted that any decision on the MoJ’s part to be announced this autumn to raise the limit to take effect early in 2014 is now somewhat less likely. At least if the MoJ still do decide to raise the limit then the Committee will expect them to be able to adequately deal with the issues they have identified.

Medical Reporting

Given the level of agreement between most, if not all, parties giving evidence to the Committee, it comes as no surprise that the MoJ proposals to improve the standard of medical reporting have been accepted. The Committee recognises the importance of information from both parties being made available to an independent expert. Where they go further is to suggest that there should be proof of injury from the claimant, such as attendance at GP or A&E before a whiplash diagnosis can be accepted. Given the existing burden on A&E departments and the fact that the cost of attendance can be recouped from the insurers, it is not clear whether the full implications of this have been considered by the Committee. The suggestion that medical records should be reviewed in every case is also laudable, but again could build in an extra layer of cost to the process. Overall, insurers are likely to see the recommended improvements in medical evidence as positive.

Limitation Period

The Committee has taken on board the recommendations to reduce the time period during which whiplash claims can be made. As DWF partner Nigel Teasdale indicated while giving evidence to the Committee on behalf of FOIL, if a whiplash injury comes on within 72 hours and typically lasts no more than 12 months, it is anomalous to give a claimant three years to bring a claim in this day and age. Hopefully this recommendation if accepted by government could see an end to the current spate of late notified whiplash claims where in reality it is of course possible to diagnose whiplash within a matter of weeks, so suggesting a much shorter limitation period for this type of claim could be justified. Consideration would need to be given to the definitions of the different types of claims to which different limitation periods would then apply if the relevant period is reduced for whiplash. We will have to see if this has any sway with government bearing in mind Helen Grant’s comment earlier in the month that “we have no plans to change the law on limitation”.

Pre-Medical Offers

The Committee expressed surprise at insurers’ practice of making pre-medical offers, and suggested this encourages fraud and exaggeration. In their conclusions they have not linked this practice back to the wider concerns over the standard of medical reporting, and have disregarded insurers’ response that as matters currently stand, pre-medical offers are made because there is no faith in the medical report being objective. If that changes, then we should see a decrease in the number of pre-med offers. Whether we will see the same happening in any event due to the reducing third party costs in the Portal and the criticism of the Committee of this practice, remains to be seen.

Fraud

The Committee does accept there is fraud/exaggeration out there although, as indicated above, they think that better data going forwards should be kept. In that context, they noted the decision in Summers v Fairclough, and the unfairness seen by insurers that a claimant can be found to have brought a grossly exaggerated/fraudulent claim yet still recover the other elements of the claim which are unaffected by those issues. Rather than going further at this time, they have called upon the MoJ to express a view on the issues involved in limiting the right to compensation where it can be shown that a claim is grossly exaggerated.

Whilst both insurers and the government have come in for some criticism from the Committee in this area, the courts have somehow escaped any blame for the perceived failure to back up the fight on fraud that was highlighted when the evidence was being given to the Committee.

Data sharing

Reference was made by claimant representatives before the Committee about some, albeit slow, progress being made whereby insurers might be willing to share data on potentially fraudulent claims. The Committee expresses disappointment at the reports of slow progress, and recommends that the government encourage collaborative arrangements in order to identify and deter potentially fraudulent claims.

The ABI has reported to the Committee since the last hearings that they have been in discussions with the claimant lobby on an initiative to share data to assist claimant lawyers to identify fraudsters earlier in the claims process, but that the parameters which they had agreed with them in April are no longer acceptable to the claimant side so causing delay that should surely be seen as due to the claimants’ changed position.

Comment

It should be appreciated that while insurers will be disappointed with some aspects of today's report, while welcoming some others, it is not a government report, though it will be influential to some extent on the issues covered in the report. The key question is - what will be the extent of the Committee's influence? If you look back to the Committee's last report in 2012, the government agreed with part of its recommendations, and the Chair of the Transport Committee was able to claim that she saw that governmental response as “encouraging” from the Committee's perspective. Will it be the same this time?

One thing we know already is that the MoJ consultation which closed in March 2013 on whiplash including the question of whether the small claims track limit should be raised, is not going to be responded to by government until it has had opportunity to consider this report from the Transport Select Committee.

The Committee’s recommendation to consult on a reduction of the statutory limitation period for whiplash claims from the current three years is encouraging. The majority of whiplash injuries can be diagnosed within a matter of weeks and a legitimate claim can be made shortly afterwards and well within a year. Any reduction in the limitation period, will reduce fraudulent claims considerably, if government can be persuaded to change the view recently expressed by Helen Grant.

The Committee has also acknowledged that government needs to introduce a more strategic approach to the whole motor fraud debate, where whiplash claims are not viewed in isolation, but the cost to insurers of the credit hire and motor repair issues surrounding RTA claims is fully reviewed and scrutinised.

Strategic decisions relating to whiplash claims, whether fraudulent or not, need the appropriate attention and leadership. Therefore the appointment of a single ministerial lead within the government, to help co-ordinate a holistic response to motor fraud is of the utmost importance. A figurehead who can spearhead a campaign for meaningful data, revealing the true proportion of fraudulent whiplash claims, would ultimately be beneficial to all stakeholders.

Read the full report here.

For more information contact:

Nigel Teasdale, Partner on +44 (0)1772 554264 or email nigel.teasdale@dwf.co.uk

Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.co.uk

By Nigel Teasdale

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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