Inflation and incubation are not the first words you might think of when looking at the profiles of low value motor bodily injury claims, especially those suitable for the OIC Portal. You may, therefore, wonder why the increasing claims cost is a topic for discussion at all. Indeed, restricting recoverable legal costs by raising the personal injury small claims track limit and imposing statutory compensation tariffs for whiplash injuries is designed to pass on motor insurance savings to the consumer and is at the centre of the intentions of the whiplash reforms. However, with the OIC Portal about to celebrate its first birthday are we seeing any evidence yet of such good intentions or are there consequences both intended and unintended driving bodily injury severity?
Actually, it can be argued that bodily injury severity in low value motor claims was profiled in the MOJ Portal well before the implementation of the whiplash reforms. In the years before the reforms, simple whiplash injury profiles were changing with an acceleration in the presentation of one or more additional minor injuries being claimed, each concisely set out in a medical report with their own description, diagnosis and prognosis. Frequency of claims for physiotherapy treatment expenses hit industrial scales and the presentation of minor psychological injuries ramped up significantly. Even though the premise of the OIC Portal is for claims to be serviced by unrepresented claimants it was clear to the market that the main claimant law firms active in the MOJ Portal would not exit, but instead lift and shift operating models and whiplash injury profiles to the OIC Portal. Their funding and revenue models, including before the event legal expenses, and damages-based agreements are now more important than ever when legal costs are no longer recoverable. In which case, if there is an emerging pattern of inflation and incubation across OIC Portal claims should we really be that surprised.
The latest official data shows that just 9% of claims in the OIC Portal have been notified by unrepresented claimants with 91% from law firms and ABS structures, which is clear evidence of the shifting operating models of claimant law firms into the OIC Portal. The data also shows 64% of claims presented are for mixed tariff claims. The volume of settlements where a claimant is represented in the system is, according to the official data, around 7%, which on the eve of the OIC Portal’s first anniversary is strikingly low even if you discount any frequency adjustments in terms of overall notifications. Therefore, can we deduce anything from the profile of claims accepted in the OIC Portal and the lack of settlements, or is it too early to draw any conclusions?
Before we do, however, we need to ask some serious questions about what might be going on. Why have there been so few settlements for represented claimants when the compensation process on a liability admitted claim is, on paper at least, so straightforward? Why are compensators reporting that the volume of medical reports disclosed by claimant law firms at such low levels when compared to medical reports disclosed by unrepresented claimants? Why are mixed tariff claims so high for a process that was predominantly, although not exclusively, designed for whiplash injuries?
There can be no doubt that claimant law firms whose model is to submit claims into the OIC Portal at scale are experiencing some issues uploading medical reports, list of losses, and documents in support on accepted claims for settlement. The MOJ has acknowledged some “teething issues”, but in reality, the processing of claims on the OIC Portal remains in a live testing scenario with manual uploads and other fixes being used to overcome technical issues. The noise coming from some, but not all, interested claimant law firms about the financial impact of these issues is getting louder as each day passes; the industry as whole needs the process to run smoothly to push through settlements, not least so claimants can be paid their compensation. The technical issues that have been experienced are significantly affecting the volume of settlements where the claimant is being represented, but compensators report that some medicals from the represented market are finding their way onto the OIC Portal, so what about those that are not finding their way on a system that is now nearly 12 months old?
For a process that is designed to cut the cost of whiplash claims it is striking that the latest official data records only 32% of claims notified are for whiplash injuries whilst 64% are for claims that involve whiplash and one or more additional injury, accepting that this applies to both represented and unrepresented claimants. The latest data also provides an insight into the level of compensation being agreed for represented claimants for mixed tariff claims averaging at £420, which suggests a commercial approach is being taken by both claimant law firms and compensators agreeing the compensation for non-whiplash minor injuries. Long may this continue in order for claimants to access compensation without a lengthy wait for a court hearing to decide their award for non-tariff injuries, especially with living costs rising steeply?
However, although still some way in the future, a decision by the Court of Appeal as to the methodology to be used to value a whiplash tariff injury concurrent with a non-whiplash injury may pose a real threat to controlling injury damages spend and deliver predicted claims inflation in the OIC Portal. The statistic of 64% for mixed tariff claims may be just the beginning, but we do not yet have enough disclosed medical reports to validate this proportion. Even if this proportion is not corroborated once medical reports are disclosed at scale by claimant law firms, it is not a large leap of faith to suggest, and assuming a claimant favourable decision by the Court of Appeal, it will not take a large leap of faith to suggest that the percentage will become higher and thus drive up overall claims inflation. If you add to that a propensity of sub-diagnostic psychological injuries, such as fear of travel, supported by justified additional medical reports which recommend a form of CBT, then the opportunity for claimant law firms to overlay damages spend through these rehabilitation expenses and generate revenue is one that, history suggests, will surely not be missed. Dark days ahead for claims inflation in the OIC Portal? For now, we will just have to wait and see.
Although volumes are proportionally low, compensators are not yet reporting a pattern of incubated claims for tariff or mixed tariff claims from the evidence and timelines in medical reports that have been disclosed. The latest official data records that 93% of settled claims are for whiplash injuries within the first three tariff bands, but that “we expect claims to fall within higher bands as time elapses”. For a proportion of a claimant law firm’s book of claims it is not unreasonable to assume that claims prognosis periods are being waited out for recovery, that physiotherapy or other rehabilitation treatments to be completed before sign-off, and other justified medical reports are being obtained. At present, all of these assumptions are no more than educated guesses, but if you set aside the technical issues, acknowledging this has been a considerable issue, what other reasons are there for the delay in releasing medicals in the OIC Portal for settlement when MedCo data does not show a significant drop-off in expert searches?.
Compensators are reviewing their operations, anticipating a real spike in the disclosure of medical reports for settlement in the next few months as the year one anniversary of the OIC Portal passes. Only then will we understand what part claims incubation has played in the delayed release of medical reports as a proportion of overall claims. Timelines from notification dates to medical examination dates will require tracking to understand handling models and to design strategic responses and know your opponent delivery. Evidence of damages inflation may become more apparent as medical reports are sifted for commonality in whiplash tariff prognoses, claims for exceptional uplifts as well as the frequency of additional physical and psychological injuries, and accompanying rehabilitation treatment.
Thankfully, there will still be simple whiplash tariff claims that will be efficiently processed through the system, but the question is the extent to which other claims may be incubated and how claims inflation may wash through the process as it matures one year on. They say that the proof of the pudding is in the eating. Only time will tell.
Director of Strategy - Motor Personal Injury
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