Samantha Ramen, Director of Market & Public Affairs, reflects on the recent announcements affecting personal injury compensation.
About a month has passed since the Chancellor George Osborne delivered his Autumn Statement. The dust may have settled somewhat – but where does that leave the insurance industry?
We are all now well versed with what the Government has announced in relation to general damages for soft tissue injuries and the small claims track limit. There has been a lot of commentary on definitions and timing, but ultimately, what we all want to know is: how will this change the frequency and severity of personal injury claims? And what can we do to ensure that the eventual reality reflects the current ambition?
Firstly, let’s take a brief look at what the Government actually plans on doing. There is still a lack of clarity around the types of claims that will be caught within their proposal to increase the small claims track limit (SCT). The Blue Book suggests that the limit is being increased as part of “measures to reduce the excessive costs arising from unnecessary whiplash claims”, but then goes on to say this will be achieved by “removing legal costs by transferring personal injury claims of up to £5,000 to the small claims court.” The implication is that the SCT limit increase would apply to motor only – why would a change to EL/PL claims address the whiplash phenomenon?
However, as we all know, an implication does not mean much. There has been no official confirmation either way on this issue – indeed, rumours abound that this will apply to all claims. I can’t help but think that this will be difficult to get over the line, particularly with regards to employers’ liability claims. Health and safety has come a long way in this country in recent years - the whole concept itself has only just made headway in shaking off its bad reputation. Appearing to obstruct an injured employee’s ability to claim from their employer is a risky political strategy.
The removal of general damages also throws up many questions. What do general damages include – or more importantly, what do they not include? The Government needs to look at this very carefully. We are all well aware of how quickly claimant representatives cope with change; one only needs to look at how they have adapted since the implementation of the Jackson reforms.
It’s all very well talking about the reforms themselves and hypothesising about how they may be defined. The question that I have been trying to answer is: what does all of this mean?
The devil is in the detail – that much is obvious. But what in particular must we make sure the Government gets right? The challenge to the Ministry of Justice is that they must now translate the high level, well-intentioned statements of George Osborne into CPR rule changes and legislation. And they must do it in such a way that what is delivered reflects the original ambitions set out last month, avoiding any unintended consequences.
Needless to say, this is no easy task. If the Government’s overall aim is to reduce motor insurance premiums, they need to make sure that whatever reforms are implemented are successful in removing money from the entire claims process. This means looking at where other leakage occurs. The credit hire and credit repair industry is a prime example of an unregulated space which has already – despite CMA investigation - spiralled out of control. We must give Government the information they need to ensure that the reforms do not allow the metaphorical balloon to be squeezed into the bent metal arena.
Damages creep is another red flag. The Government has announced a change in the SCT limit to £5,000. Is this the right level? And where did they get £5,000 from? This must be managed extremely carefully; there is a serious risk that an increase to £5,000 may serve purely to push damages up and out of the SCT limit, scuppering the entire exercise. Indeed, this possibility has become even more likely since the recent increase in the Judicial College Guidelines (particularly the 20% increase to low value injuries). An increase to the SCT limit needs to make a real and discernible difference to the claims environment; careful analysis must be undertaken in order to ascertain what this level should be.
The removal of general damages must also be managed carefully, otherwise we will see medical experts simply moving the goalposts by, for example, reporting psychiatric injury as the main head of claim with soft tissue injury as an aside.
I have further concerns about the reforms – I think that they are incomplete. There has been no mention of safeguards to ensure access to justice. Claimants need to be able to make a claim as litigants in person easily and with certainty that their claim will be conducted and concluded fairly. The only way to achieve this is to ensure that there are protections in place for them to navigate the claims environment without a legal representative.
The Government needs to look at the following possibilities in addition to their current plans; it is essential that they do so because access to justice is a principle that lies at the very core of our legal system; politically, it is also important because without them I can see they will have difficulty pushing their reforms through Parliament.
It is imperative that the Government gets this right so as to avoid any unintended consequences. We have to learn from the mistakes of the past; the patchy and piecemeal implementation of the Jackson reforms must not be repeated. If we are to follow on with the promise delivered by Government on our behalf to save customers £40-£50 from their motor insurance policies, the industry needs to engage with decision makers at all levels to ensure that this is done properly.
Keoghs will be monitoring these issues closely in 2016 and is currently formulating a political engagement plan to ensure that clients’ voices are heard in Parliament and the Ministry of Justice.
Please don’t hesitate to contact me if you would like further information.
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