In November 2015, George Osborne surprised many in his Budget speech by recommending an increase in the Small Claims Track (SCT) limit for personal injury claims from £1,000 to £5,000 and also stopping or reducing compensation for ‘minor’ soft-tissue injuries, which are mainly whiplash injuries arising out of Road Traffic Accidents.
Now, 12 months on, after changes in the PM and Cabinet, the Government has finally announced that it will be pressing ahead with such changes, starting a consultation period with relevant parties (insurers, legislators, specialist lawyers for both Claimants and Defendants, etc.) which will last until January 6, 2017. Thereafter, the Government has promised in the consultation paper that they “aim to implement these reforms as soon as possible”
The exact terms of the new laws are to be debated, but the proposals include measures such as reducing compensation for whiplash claims to around £400, preventing claims for whiplash injuries under 9 to 12 months or stopping such claims completely.
Insurers have been pressuring the media and Government for a number of years, alleging that the UK is the ‘whiplash capital of the world’ and tackling the SCT limit and whiplash claims could vastly reduce their outlay and they could then pass on such savings to all motorists.
However, solicitors specialising in this area have said consumers simply know their rights more readily these days, the insurers’ assertion of a ‘compensation culture’ is simply a myth, as supported by Master of the Rolls, Lord Dyson, in 2015 and that any savings made by the insurers will not be passed onto motorists, but instead will boost insurer profits.
Raising the SCT limit as above would mean that solicitors acting for Claimants with personal injury claims of a value of less than £5,000 could not recover their costs from the other side. Accordingly, lay Claimants may have to represent themselves against experienced insurance handlers or they would have to pay solicitors’ fees themselves.
Insurers have suggested that such claims are simple so Claimants could deal without legal assistance; therefore cases could be settled quicker, easier and cheaper. APIL have strongly argued against this, saying that this would lead to Claimants being under-compensated.
In recent years insurers have allowed solicitors access to a fraud database (AskCue), there has been the introduction of a Claims Portal for ‘low-value’ claims (upto £25,000), reduced recoverable costs, etc., but this time the Government is seeking to wipe out a huge swathe of personal injury claims in one go.
These changes were implemented after insurers successfully campaigned via sections of the media and lobbied the Government, proposing that they could pass on savings to every motorist to the tune of £90 per year. However, a recent report has found that despite insurers saving over £500m in whiplash claims, insurer profits remain high and no such savings have been passed on.
Parties representing both Claimant and Defendant lawyers (APIL and FOIL respectively) may agree that the Government should consider an increase in the SCT limit for personal injury cases, which has not changed since 1991, but whether it should be immediately raised to £5,000, is up for debate.
The proposal for an increase in the SCT limit was previously considered in 2013, but was not implemented after it was argued that genuine Claimants would be unable to claim because they could not afford the legal assistance required as changes would stop solicitors recovering their costs from the other side.
Recent studies by the insurance industry presented to the Government suggest that consumers could save £40-£50 per year if savings are passed on through reduced premiums. The Government suggests the insurers will save £1 billion a year and they “expect the vast majority of these savings to be passed onto consumers through reduced premiums”, but opponents argue that this will not be monitored by anyone and instead insurance premiums and profits will remain high.
This Government has already made a number of changes in other areas of the law, including increased fees for civil, divorce and employment claims, reduced Legal Aid, etc. with consumer groups arguing that the ‘man/woman on the street’ is increasingly unable to afford legal assistance, which is limiting access to justice and this latest change could be seen likewise.
It will be interesting to see how things develop in the coming months and years, how changes are perceived and then implemented and if any promised savings will be passed on.