Motor insurance bill targets 'grubby industry'

Former justice secretary Jack Straw has introduced a bill to reform personal injury in the motor insurance market and clean up a 'grubby industry' feeding on the promise of compensation.

The bill especially targets whiplash claims, proposing new evidential standards before damages are paid, amending the pre-action protocol for road traffic accidents and halving the flat fee lawyers receive for handling small claims.

Lawyers on both sides of the claimant/defendant divide, however, are sceptical about the rationale behind the bill.

'Jack Straw is deluded if he thinks a lawyer could possibly give advice to an injured person for the price of £100,' responded Deborah Evans, chief executive of the Association of Personal Injury Lawyers. 'In all cases the solicitor needs to talk to the client to understand the symptoms, and the impact of the injury on the client's life, as well as obtaining a medical report. These were the factors taken into account when fixed costs for road traffic accidents were agreed with the insurance industry only last year.'

Evans took issue with the former justice secretary's comment about whiplash. Pointing to research in an Association of British Insurers' 2008 report Tackling Whiplash: Care, Prevention, Compensation, she said vehicle bodies have become stiffer since the late 1980s. This increased crashworthiness in high speed rear-end crashes and helped reduce the incidence of serious injuries but 'may increase the incidence of whiplash, due to higher relative transfer of energy in a crash'.

For James Arrowsmith, solicitor with Browne Jacobson who is acting mostly for defendants, Straw's proposals failed to address one of the main drivers of litigation: the size of personal injury awards.

'Courts have been prepared to award high costs, and, as long as they will continue to do so, it will continue to encourage claims,' Arrowsmith said.

While there was a genuine public interest in ensuring that people aren't permitted to profit from insurance business to excess and safeguarding access to justice, costs had to be controlled, he said.

'There are ways to control costs; for instance, fixed fee for lower-value claims,' Arrowsmith continued. 'But simply halving the fees is not appropriate. Proper research is needed '“ as suggested by Lord Justice Jackson '“ to identify the true costs of running a case. In higher-value cases, there should be more flexibility, which should be achieved through judicial scrutiny.'

A number of cost-budgeting pilots are ongoing. Those most relevant to personal injury lawyers include the one on provisional costs assessment, which is running until June 2012, and the one on docketing, which is running until October this year. Feedback has been positive.

Arrowsmith said the rules in the pilots took some getting used to but they helped focus the mind on the issue of costs. Another important obstacle was judicial resources: 'Judges can't always exercise case management in the way they want it,' he said. 'Training of judges about cost budgeting is also an issue '“ it tends to be raised by defendant insurance lawyers because they're picking up the costs '“ but there is a wider concern to keep costs under control.'

• For details of the motor insurance bill, visit solicitorsjournal.com/pi