Insurance Companies -v- Whiplash Victims

Next year, the government intends to make some drastic changes to personal injury claims. The government believes, based on a review of data provided predominantly by insurers, that the UK is in the centre of a ‘whiplash epidemic’. As a result, they want to reduce the number of claims being made by people with soft-tissue injuries.

The government maintain that the reforms are being introduced to reduce the number of fraudulent and unnecessary claims that insurers say are costing the motor industry around £2 billion each year. However, there is a distinct lack of evidence to back-up this figure and some have suggested that it has been hugely distorted. In 2014, less than 1% of motor accident claims were proven to be dishonest and year on year the number of personal injury claims being presented has fallen.

Statute Books

What are the government’s proposals?

The government’s proposals are:-

  • that whiplash injuries attract a strict fixed compensation figure depending on the prognosis provided by an independent medical expert; and

  • that the small claims limit be increased from £1,000 to £5,000 for all whiplash claims and £2,000 for all other personal injury claims

How will this affect me?

On face-value you might think that the proposals won’t have a direct impact on you however, under the proposed reforms, if you are involved in a car accident and suffer a whiplash injury not only will you face a dramatically reduced compensation award but you will also have to represent yourself.

Currently, an individual who suffers a 6-month whiplash injury will usually be awarded compensation in the region of £2,600 depending on the impact their injuries have had on their day-to-day life. Under the proposed fixed tariff scheme, the same person would receive a mere £450.

In addition, presently any claims for personal injury that are valued at £1,000 or above (e.g. a whiplash injury lasting four weeks or longer) are allocated to the fast track. This means that upon settlement of your claim, your solicitor receives a fixed amount of legal costs depending upon the point at which you claim has settled. Some solicitors also choose to top those fees up by taking a deduction from your compensation award, albeit that this isn’t strictly necessary.

When the small claims limit is increased on 1st October 2018, whiplash claims valued at less than £5,000 and all other kinds of personal injury claims worth less than £2,000 will be allocated to the small claims court. Claims allocated to the small claims track only permit solicitors to recover a total of £80 plus VAT no matter how many hours of work are put in to the claim, meaning that solicitor will not be able to afford to run the claims without taking a significant chunk of their client’s compensation award.

Because the majority of road traffic accident claims are valued at less than £5,000, thousands of people with genuine claims will find themselves effectively being denied access to justice because they may not understand the claims process or be able to afford to meet the upfront cost of instructing a MEDCO expert to prepare a medical report on their behalf (£216 inc. VAT).

Alternatively, if they choose to instruct a solicitor, they will have to pay their legal fees themselves, which could mean taking a hefty chunk out of their compensation. In cases where individuals have suffered injuries 12 months of less, it may well be that their legal fees completely wipe out their compensation.

Why are the reforms happening?

The government is seeking to justify the reforms by suggesting that the ban on whiplash claims will reduce the cost of insurance premiums by around £40-50 a year. However, this figure has never been explicitly confirmed by insurers and some critics suggest that a figure of £16 is more accurate. There is of course no evidence of insurers passing savings resulting from legal reforms onto their customers and therefore innocent victims of whiplash injuries could see their access to justice removed for no financial gain.

By preventing victims of accidents from claiming compensation, it is ultimately the insurance companies who will profit. The changes will make the process of securing compensation harder and are likely to put people off claiming at all. Innocent victims will be unable to access the justice they deserve leading to them missing out on thousands of pounds in compensation which they were previously entitled to.

What are the wider implications?

When a claim is presented to an insurer, they are obliged to register the claim with the Department of Work and Pensions who ascertain whether the NHS has provided any treatment to the injured party and/or if they have received any state benefits as a result of the accident (e.g. statutory sick pay, disability living allowances, etc.) Any outlay incurred by the NHS and DWP as a result of your injuries can then be recovered from the third-party insurance company at the end of the claim, meaning the public purse is replenished.

In addition, many injured victims require treatment as a result of their injuries such as physiotherapy or cognitive behavioural therapy. Whilst these services are available via the NHS, the waiting lists can be considerable and as a result the solicitor dealing with such claims will often arrange for a private treatment provider to supply treatment to ensure that their client’s gets any necessary treatment as soon as possible.

If the reforms are imposed in their current format, the number of claims being made is likely to fall dramatically as a result of victims being unable to instruct a solicitor. However, this does not mean that fewer accidents will happen, it simply means that those who are injured will feel unable to access justice.

Furthermore, injured parties will find it harder to access private treatment unless of course they have the funds available to pay for it upfront. As a result, NHS treatment waiting lists will increase as will the period of pain and suffering endured by those who could have been on the road to recovery much sooner had early treatment intervention been a realistic option.

All in all the proposed reforms put an end to compensation claims as we currently know and understand them. Without doubt those who suffer a whiplash-type injury as a result of non-fault accident will find it harder to access treatment, recover their financial losses and obtain any compensation they may be entitled to. There is also a very real risk that the court will struggle to cope with the number of Litigants in Person and that insurance companies will fail to pass on the 'significant' savings promised to motorists - we'll be keeping a very close eye on developments.

Katie Baker

Nelson Myatt LLP

01492 588200

#personalinjury #legalreforms #compensationclaims #carinsurance #whiplashclaims

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