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Insurers cry foul as MoJ rows back on whiplash reform

APIL calls on the government to investigate insurance industry for rising premium costs

13 October 2016

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Controversial reforms to personal injury claims are to be shelved as the insurance industry complains that the government has caved in to the ‘vested interests of ambulance chasing’ lawyers.

In 2015’s Autumn Statement, the then chancellor, George Osborne, promised to consult on a ‘crack down on the fraud and claims culture in motor insurance’ and to ‘end the cycle in which responsible motorists pay higher premiums to cover false claims by others’.

Osborne announced the government’s intention to remove the right to general damages for soft tissue injuries and increase the small claims limit to £5,000.

The Treasury said the crack down on minor whiplash injuries would save £1bn a year from premiums, but - with a consultation paper still yet to be launched - the insurance industry now fears the reforms have been kicked into the political long grass as the government ‘cave[s] in to the vested interests of claimant law firms’.

According to the Times, ministers have told insurers they are now unenthusiastic about the former chancellor’s plans. James Dalton, director of general insurance policy at the ABI, said the Ministry of Justice was ‘rowing back’ from reform that he maintained would save motorists up to £50 a year.

‘The UK has one of the most abused systems in Europe and the reforms would tackle the excesses of the compensation culture,’ he said. ‘Without action, claims management companies will continue to nuisance call and text honest motorists encouraging them to make fraudulent and exaggerated claims through claimant law firms.

‘Every day of delay costs honest motorists across the UK nearly £3m. The plans are drawn up and ready to go so there is no excuse for not pushing ahead. If the MoJ delivers on its promises, millions of honest customers will be better off. If they cave in to the vested interests of the ambulance chasers and cold callers, those businesses will be laughing all the way to the bank at the expense of honest motorists.’

The ABI claims that delays introducing reform will cost UK motorists £4bn over the course of this parliament, with the average motorist £200 worse off if the government does not deliver on its promise.

The insurance trade association said the rising cost of personal injury claims had pushed up motor insurance premiums by 10 per cent over the last year, with the costs of ‘average bodily injury’ claims rising by over 5 per cent to nearly £11,000.

Evidence as to the extent of fraudulent claims by the ABI has been described as ‘distorted’ by claimant lawyers. An analysis of 2014’s figures from the ABI showed that only 0.25 per cent of motor claims are proven fraudulent.

Neil Sugarman, president of the Association of Personal Injury Lawyers (APIL), took aim at the insurance industry’s rhetoric and claims it would pass on savings to consumers. The GLP Solicitors partner also called on the government to investigate insurers to ascertain the real reason for rising premiums.

‘When news emerged in the summer that insurers had failed to pass on savings from previous personal injury reforms to motorists, it was clear that the proposed reforms were aiming at the wrong target,’ said Sugarman. ‘Car insurance premiums continue to rise while costs to insurers from personal injury claims are falling. It’s now time for the government to investigate the real reasons for rising premiums and hold the insurance industry to account.’

However, the APIL president cautioned that there was no room for complacency within the personal injury sector: ‘We will continue to argue that any reforms to the personal injury claims process must be based on independent evidence, rather than insurance industry rhetoric.’

Meanwhile, Donna Scully, a partner at Carpenters, said: ‘Now is the time for the whole sector to set aside its differences and work constructively together. We need to work on implementing the Fraud Task Force recommendations, make MedCo work more effectively, improve the regulation of CMCs, and talk about other areas where things can be improved to support genuine customers.’

A survey commissioned by Access2Justice, a body which has been campaigning against the government’s reforms, and published in April showed that 57 per cent of the public described the proposals backed by insurers as either ‘unfair’ or ‘very unfair’.

Kennedys partner Ian Davies, who advises insurers on how to handle low-value, high-volume claims, said: 'The decision may ultimately be a wise move. Insurers have many challenges ahead of them in a post-Brexit world. The claimant market has undergone significant consolidation recently. A period of calm, and dare I even suggest an opportunity for both sides to work together to find a mutually acceptable solution to propose to the government, may benefit all sides.'

John van der Luit-Drummond is deputy editor at Solicitors Journal

john.vanderluit@solicitorsjournal.co.uk | @JvdLD

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APIL ABI George Osborne MoJ personal injury insurance