“To improve is to change; to be perfect is to change often” – Sir Winston Churchill
2024 has been a busy year for the volume low-value motor injury claims space.
We have seen the publication of the 17th edition of the Judicial College Guidelines and the Supreme Court judgment in the test cases of Rabot and Briggs. We had hoped to know the outcome of the review of the whiplash tariff but the calling of a general election has got in the way and there are now several different scenarios regarding the publishing of the report completed by the Lord Chancellor, the timing of when it will be laid before Parliament and, indeed, if there is a change of government whether it will be accepted or amended by a new administration or the process started all over again.
What we can conclude, however, is that even without the outcome of the whiplash tariff review there continues to be a case to argue for a review of the small claims limit. So, what is the case for a review and how likely is a review to happen any time soon?
The limit for small claims was set at £1,000 in 1991 and Lord Justice Jackson’s comprehensive review of civil litigation costs concluded in 2009 that the small claims limit for personal injury should stay at £1,000 “until such time as inflation warrants an increase to £1,500” to avoid potential confusion arising from a series of small increases. A further consultation by the Coalition Government led to the general small claims limit being increased from £5,000 to £10,000 from April 2013, but no changes were made to the £1,000 limit for personal injury.
In November 2015, the then Chancellor George Osborne announced in his spending review that the Conservative Government would increase the personal injury small claims limit from £1,000 to £5,000. For road traffic accidents occurring on or after 31 May 2021, the Conservative Government implemented the whiplash reforms as set out in Part One of the Civil Liability Act 2018, together with the RTA Small Claims Protocol and the launch of the Official Injury Claim portal (OICP) and an associated increase of the small claims limit for road traffic accidents related to personal injury claims from £1,000 to £5,000 with some exceptions such as claims brought by infants or vulnerable road users.
To understand the arguments for an increase in the small claims limit we need to examine the impact of the Supreme Court judgment in the test cases of Rabot and Briggs and the effect of the 17th edition of the Judicial College Guidelines.
Supreme Court Judgment
The handed down judgment confirms the Sadler approach to valuing mixed injury claims as set out by the majority decision of the Court of Appeal. That approach is:
Although both the Sadler step back and the caveat will affect a final valuation, it is the initial common law assessment of the non-whiplash injury that is most significant as this provides the starting point for the methodology, and this is now influenced by the publication of the 17th edition of the Judicial College Guidelines.
Judicial College Guidelines 17th edition
Published in April, the effect of economic inflation on injury valuation bandings is significant even for minor injuries. The average inflationary uplift using RPI as a measure is 22%. However, there is a caveat which states that “for the avoidance of doubt, of course, these guideline figures should be increased by the appropriate index for inflation between August 2023 and the date of any assessment of damages.” The trajectory of inflation remains downwards such that any additional inflation using the RPI Lansdown and Hargreaves inflation calculation from September 2023 to June 2024 is around 1.8%, should this need to be factored into compensation values.
The inflationary increases provided also need to be looked at in the context of an eventual readjustment of the current whiplash tariff fixed amounts and what this might look like.
Whiplash Tariff Review
The Civil Liability Act 2018 provides the statutory authority for a mandatory review of the tariff amounts three years from the date of their introduction and a call for evidence closed on 2 April 2024. Although the mechanics of the review are still unclear, what we can say is that the present tariff amounts were inbuilt with an element of future predicted economic inflation at about 11% using CPI as a measurement and it is indicated that this index will be used as part of the review and not RPI.
Arguably, future-proofing the tariff levels for ongoing inflation has not been successful due to the economic inflation trajectory which debatably saw the 11% component eroded within the first 12 months of the whiplash reforms. No doubt the same future-proofing for economic inflation will be built into the next set of tariff amounts – the exercise of future-proofing may lead to a lower level being accounted for, but arguably not at the 22% uprating set out in the 17th edition of JCG, although this will be strongly contested by claimant stakeholders.
It is unclear if the new tariff amounts will apply retrospectively to existing claims in the low-value injury claims servicing portals (and other claims which include a whiplash injury) or whether the application will be from a future accident date. There is a strong argument to suggest from a future accident date when accounting for the implementation of the whiplash reforms by accident date and the fixed recoverable costs extensions for personal injury claims also by accident date although, again, this is by no means certain.
If Labour is voted in at the general election then it is unlikely that the existing report by the current Lord Chancellor on the tariff reviews will be published any time soon and that does not account for any amends, kicking off a new review and any laying before Parliament such that we may not see the report and any implementation of the recommendations until the end of summer or early autumn.
We can predict that the impact of the events discussed above will disrupt the effect of the proportion of motor personal injury claims under £5,000 (about 77%), which are not cost bearing and claims over £5,000, but not more than £25,000 (about 23%) which attract fixed costs which is likely lead to OICP deterioration and a frequency uptick in the MOJ portal. Our data indicates that this displacement risk sits at about 3% of submitted claims in the OICP, but could uptick to around 10% and we will be closely monitoring the position for the rest of 2024.
Our data also tells us that for Q1 of 2024, the presentation rate at medical report for settled claims in the OICP for concurrent whiplash and non-whiplash injury profiles was 55%. If we add in pending medicals, we can predict that this rate increases to between approximately 65% and 70% – possibly even higher. And the same data shows an average whiplash prognosis of 6.61 months and 4.35 months for a non-whiplash injury – both of which are lead indicators of increasing injury severity.
Put simply, without an increase to the small claims limit the inflationary effects of the 17th edition of the Judicial College Guidelines combined with the method to value a mixed injury claim and eventual increases to the whiplash tariff will increase injury severity and displace claims into cost-bearing regimes. If this happens to any degree, it will have a negative impact on indemnity spend accruals and any savings that might be passed on by compensators in the pricing of motor insurance premiums.
Unless the small claims limit is increased to reflect increasing claims costs, the benefit achieved by the RTA Small Claims Protocol will be lost. To reflect the inflationary nature of mixed injury claims profiles, a rise of 10% is the minimum that ought to be considered and indeed a higher rise would not throw the cost-controlling benefits of the small claims limit out of kilter. A one-off review would be beneficial, but arguably subsequent reviews should be linked to an inflationary index and given the method for valuing claims is impacted by inflation then it is difficult to see why not. The inflationary measure to be used should be CPI or CPIH as RPI is no longer deemed to be an appropriate index despite what the Judicial College says and since the inflationary target of the UK Government became CPI in December 2003 it is difficult to argue for any other index.
This is where a likely change of government after the general election complicates matters. If the polls are correct and Labour forms a new government then it will have numerous priorities to look at which may delay any review of the small claims limit. Indeed, any review is likely to be wrapped up in an overall review of the fixed recoverable costs tracks and even the Ministry of Justice cannot now commit to a review and any timescale. Increasing court backlogs and overcrowded prisons will probably take priority sending a message to the public about Labour’s criminal and civil justice intentions.
What we do know is that Labour has revealed plans to look at the increasing cost of motor insurance and will call in regulators to examine the causes of premium price rises. Such a review is likely to be wide and encompassing and must inevitably look at the adequacy and vulnerability of the small claims limit. But for now, we will just have to wait and see how things pan out after the general election.
We should take every opportunity to raise the issue of one or more increases in the small claims limit. This should take the form of stakeholder lobbying where appropriate and other ways to keep the issue on a government agenda, such as ensuring the small claims limit is looked at when the Civil Liability Act 2018 is reviewed at some point during the next Parliament. We will continue to draw down our data in respect of the presentation of claims displacement as well as enhanced data insight in respect of severity driven by the frequency of settled mixed injury claims in the Official Injury Claim portal. We will continue to track average prognoses for non-whiplash injuries to bolster the lobbying and the overall intention to reduce the cost and frequency of whiplash claims, putting forward a case that there should be incremental reviews of the small claims limit. As Sir Winston Churchill said: “To improve is to change; to be perfect is to change often.”
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