Autumn statement makes 'mockery' of MoJ's PI consultation

The chancellor, Philip Hammond, has confirmed the government's plans to introduce legislation aimed at ending 'the compensation culture surrounding whiplash claims', despite the Ministry of Justice having only just released a consultation on its proposals.

Responding to the announcement, Simon Stanfield, chair of the Motor Association Solicitors Society and a partner at Simpson Millar, said the chancellor's commitment to legislating on the reforms in 2017, and before it has heard from stakeholders, 'makes a mockery of the supposed consultation process'.

Last week the Ministry of Justice published a consultation paper on plans to reduce the 'unacceptably' high number of whiplash claims that it argues is driving up the cost of motor insurance premiums.

The proposals suggest either scrapping the right to compensation or, alternatively, placing a cap on the amount people can claim for minor soft-tissue injuries, cutting the average compensation for whiplash from £1,850 to a maximum of £425.

The government says the reforms are necessary to fight insurance fraud, allowing insurers to cut insurance premiums and pass 100 per cent of the savings '“ approximately £1bn '“ to motorists, saving drivers an average of £40 on their annual premiums. However, the MoJ's own impact statement predicts only 85 per cent of savings insurer savings will be passed on to consumers.

However, in order to raise revenue, the chancellor also announced plans to raise insurance premium tax from 10 per cent to 12 per cent from next June.

'Based upon past evidence, absolutely no-one should believe that the supposed savings from the proposed changes to the reforms process will be passed on to consumers,' said Stanfield. 'Whether it is IPT increases or market conditions, there will always be other excuses for high motor insurance premiums.'

Neil Sugarman, president of the Association of Personal Injury Lawyers, agreed, saying: 'The insurance industry has a track record of failing to pass on savings made from previous reforms by lowering premiums. The excuse that [the reforms] will generate a saving for motorists when those same motorists will almost certainly be forced to pay for the increase in tax simply adds insult to injury.'

Elsewhere in his Autumn statement, though the chancellor revealed plans to ban pensions cold calling, Hammond made no such commitment to prohibiting the practice for personal injury claims, which both claimant and defendant lawyers have highlighted as a major source of insurance fraud.

'It is apparently possible to ban cold calling in some sectors, but yet claim that it should be preserved in personal injury,' said Stanfield. 'Unscrupulous companies are ripping off consumers daily and this must be addressed urgently as part of the fight against fraud.'

Figures from Aviva claim that an estimated 600 million personal-injury related nuisance calls were made in 2015, along with an estimated 117 million text messages. 'If consumers can be protected from colds calls from people selling pension products '“ and mortgage brokers since 2004 '“ then there is absolutely no excuse for not protecting them from the estimated 2 million cold calls and texts per day related to personal injury,' said Donna Scully, a partner at Carpenters.

More than 70 organisations, including leading law and marketing firms, recently called on the government to stop nuisance calls by introducing a blanket ban in the Autumn statement. Among its proposals, the Ethical Marketing Charter urged the MoJ make immediate changes to claims management regulations and called for the Solicitors Regulation Authority to 'name and shame' rogue law that accept leads generated through nuisance calls.

In a statement earlier this month, Matthew Currie, a partner at Irwin Mitchell, said the charter's action plan would help to cut cold calls off at source: 'This type of marketing is a nuisance to consumers as well as misleading them and damaging the reputation of the legal profession '“ the government has an opportunity to address this issue in the Autumn statement.'

Other measures included in the MoJ's consultation include raising the small claims limit from £1,000 to £5,000 and banning offers to settle claims without medical evidence.

However, an increase to the small claims limit will impact more than 140,000 non-whiplash related cases, according to a new analysis by National Accident Helpline.

A review of Compensation Recovery Unit data showed a five-fold increase to the claims limit will affect a total of over 800,000 claims annually. The CRU statistics suggest that a significant proportion of non-whiplash claims would fall within the proposed small claims limit, including 83 per cent of public liability and 78 per cent of employers' liability cases captured by the change.

Catherine Dixon, the chief executive of the Law Society, said Chancery Lane continued to express 'extreme concern' over the government's 'ill-advised assault' on personal injury law: 'These proposals will completely undermine the right of ordinary people to receive full and proper compensation from those that have injured them '“ often seriously '“ through negligence.'

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

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