Tackling the whiplash epidemic

With whiplash claims costing insurers over £2bn per year, adding approximately £90 to the average car insurance premium of honest motorists, it comes as no surprise that there has been significant political, media and consumer interest in tackling the compensation culture over the past few years.

In the context of stretched household budgets and the challenges facing consumers in terms of the overall cost of living, paying for fraudulent and exaggerated whiplash claims is a cost consumers can do without.

Premium reduction

The industry has been delivering on the public commitment it made to reduce car insurance premiums at the prime ministerial insurance summit in February 2012.

Following the reforms to the civil litigation system, premiums have come down substantially in the past 12 months. The ABI premium tracker, launched in January, shows that the average premium fell by nine per cent in the past year. Independent surveys show similar premium reductions.

However, what remains to be seen is the
extent to which these premium reductions are sustainable over the medium term without the government delivering further substantive reform of the civil litigation system.

Last year, the Ministry of Justice consulted on two proposed reforms in relation to whiplash claims. One was to increase the small claims track limit (SCT) from £1,000 to £5,000 and the other was to reform the medico-legal reporting system.

The government concluded that, although there were strong arguments for increasing the SCT limit, there was still further work to do to provide robust safeguards for claimants before increasing the limit.

The government is right to highlight the strong case for increasing the SCT. The current limit of £1,000 was set in 1991, when 50 per cent of personal injury claims fell within its jurisdiction. Now fewer than nine per cent do.

It would not be right, however, to have a system in which access to justice for genuinely injured claimants is undermined. That is why the SCT limit needs to increase in parallel with the introduction of safeguards for claimants, such as the introduction of an industry-wide predictable damages framework.

The fact that the government has deferred a decision to increase the SCT is clearly a missed opportunity to quickly improve the efficiency
and effectiveness of the civil litigation system
and to further reduce car insurance premiums
for customers.

But insurers remain committed to ensuring that the necessary safeguards are in place for a much needed SCT increase in the future.

Clinical findings

The area where the government did decide to go ahead with reform is in relation to the medico-legal reporting system. For too long there have been a number of doctors producing huge numbers of medical reports that are simply not fit for purpose.

The government’s consultation response recognised that a number of medical reports are of poor quality, that there is a need to improve standards and that there needs to be an end to any real or perceived financial incentive for doctors to make a particular clinical finding.

There is much in the way of detail to be
worked through to develop a new medico-legal reporting framework. The Ministry of Justice
has set challenging timeframes for this work
to be completed given the desire to make announcements before the summer parliamentary recess in July.

The focus of the Ministry’s work to date has been on improving the quality of the medical reports, fixing the cost of the reports in the Civil Procedure Rules and exploring concerns about insurers making offers to settle claims without a medical report.

Improving the quality of, and fixing the fee for, medical reports is a step in the right direction, but will only go so far. After all, no amount of reform will make up for the fact that there is still no objective test for whiplash.

There are still many important areas of the reforms that will need to be carefully considered as they are brought forward, the most important of which will be the independence of those producing medical reports. It is vital that there is no financial link between those commissioning a medical report and those producing it, as that can create a perverse financial incentive to make a particular clinical finding.

Another vital element of reform will be the introduction of monitoring, peer review and sanctions for adverse behaviour. At the moment, professionals produce medical reports knowing full well that the chances of the report being challenged on either a particularly long prognosis period or a referral for rehabilitation or psychiatric assessment are slim because proving adverse behaviour is a significant challenge.

Robust reform

In addition to reform of the medico-legal reporting system, the Ministry of Justice is also looking at the issue of pre-med offers. Some insurers rightly question the benefits of asking
for a medical report on an injury which has no objective test, which has little chance of coming back with a diagnosis other than for whiplash
and which will add over ten per cent to the cost of the claim.

However, insurers recognise that they have to play a part in helping to tackle the UK’s whiplash epidemic. As such, the industry could consider stopping pre-med offers if the reforms to the medico-legal system introduce a greater degree of rigour and the fee for the report is incorporated into the Civil Procedure Rules.

It is also important to note that claimant lawyers can play a role too. It is usually represented claimants, not unrepresented claimants, that pre-med offers are made to and more often than not directly at the request of the claimant’s lawyer.

So, if claimant lawyers are so keen to end the practice of pre-med offers, it would be helpful if they stopped requesting them.

It is important to recognise that if the reforms to the medico-legal reporting framework are not introduced properly or are watered down to protected vested interests, simply banning pre-med offers will achieve little. In fact, it would only serve to add additional cost to personal injury claims which would ultimately lead to increased premiums.

So what does the future for whiplash claims hold? Robust reform of the medico-legal reporting system has an important role to play, but should not be seen as the panacea for delivering further reductions in car insurance premiums.

Given that there remains no objective test for whiplash, combined with the number of vested interests in the wider claims industry, the government’s proposed reforms to tackle frivolous and exaggerated claims may not deliver the outcomes that are hoped for.

It is important that the government recognises this and is prepared to implement further reforms if necessary to help tackle the whiplash epidemic, which will help to reduce car insurance premiums for honest motorists. SJ