Whiplash Reforms are here
After many years of discussion and debate the government signed off on a course of action to drive down the cost of car insurance by addressing rises in motor insurance pay outs for small personal injury claims.
The government has made changes to the claims process for low value road traffic accident (RTA) related personal injury claims, commonly referred to as ‘whiplash claims’, effective from 31 May 2021 onwards. The reforms apply to low value injury claims arising from an RTA including whiplash. These changes mean you will have the opportunity to settle these small claims online without the need to go to court or for legal representation.
What is the reason for the reforms?
Whiplash style claims in the UK are more common than in other major world economies. It is reported that road accidents have fallen by 30% since the mid 2000’s, but conversely there has been a 40% increase in personal injury claims. The government believe many of these personal injury claims are exaggerated and fraudulent. The planned reforms are designed to clamp down on the perceived compensation culture. We will also see action taken on cold calling activity (the bane of everyone’s life!), regulation of claims management companies and a clampdown on holiday sickness claims, amongst others. Savings to insurers are estimated to be around £35-£40 per policy and insurers have committed that they will channel this back resulting in customer insurance savings.
When are the reforms coming into force?
After numerous set-backs spanning accross the past few years, the government has now confirmed that the reforms will come into force as of 31st May 2021.
What is the impact?
The reforms will see the small claims court limit for road traffic accidents increased from the current £1,000 to £5,000. A new fixed compensation tariff for pain and suffering for whiplash claims will be operable for claimants with an injury recovery period of up to 2 years. Claims involving children or other protected parties are not to be allocated to the small claims track. A ban on settling or seeking to settle whiplash claims without medical evidence of the injury will also be introduced. This will prevent defendant insurers paying off low value claims rather than incur the expense of investigating them properly.
Who is effected?
In the current process, a claimant pursuing a claim for personal injuries valued over £1,000, could utilise the services of a solicitor whereby their legal costs would be recoverable from the at-fault third party and their insurers. It is estimated that 90 – 97% of all Road Traffic Accident personal injury cases will now fall within the new whiplash compensation tariff and/or the small claims track limit. This means that for any claimant,who wants to utilise the services of a solicitor for a small personal injury claim under £5,000, will now have to pay for their own legal costs out their own pocket. The compensation pay-out is significantly reduced, especially for the smaller injury duration claims. For instance, the bulk of current personal injury claims, in the 0 – 6 months recovery time period will see a reduction in compensation payable from a cap of £2,950 to a cap of £495. Of course, any significant personal injuries sustained through a Road Traffic Accident which fall outside of the new small claims court limit will be handled as they do currently. The claimant will be able to utilise the services of a solicitor with their costs being recovered from the liable third party or their insurers
How will clients make personal injury claims?
For personal injuries falling within the new small claims court regime and where clients don’t have the appropriate Legal Expenses cover in place, claimants will be required to present and manage their own claim via a dedicated online portal. There is a concern that ordinary people will stop getting the appropriate legal advice and support to bring claims for compensation they are genuinely entitled to in law. In other words, restricting their access to justice. Additionally, there is further concern that the court system could become overwhelmed by claimants who act as ‘litigants in person’.
What are the customers needs?
The needs of the insurance customer will not change. Quite rightly they will continue to demand the very best claims service from their broker and any claims service partner the broker uses. In the event of a non-fault accident, the insurance customer will still need help to find alternative transport, arrange for their vehicle to be repaired, obtain recovery of uninsured losses and loss of earnings etc, excess recovery, ultimately proving their innocence, personal injury compensation whether inside or outside the new small claims court limit and whether they are travelling in the UK or abroad. The landscape changes further increase the need for insurance customers to pre-purchase quality, fully insured motor legal expenses policies from brokers. Even in smaller personal injury cases up to £5,000 in value, the policy will completely fund the appropriate legal representation needed to ensure the correct compensation is obtained for the claimant.