Written evidence submitted by Motor Accident Solicitors Society (WHI0023)

1. The Motor Accident Solicitors Society (MASS) comprises over 80 solicitor firms that employ over 1,500 lawyers and claims handlers throughout the UK, acting for the victims of road traffic accidents. Collectively member firms conduct the vast majority of RTA PI claims each year.

2. We represent claimant solicitors on the boards of MedCo and Claims Portal, both organisations we helped to establish. We have led on initiatives around greater co-operation across the sector, directly negotiating with insurers, which has resulted in significant improvements in data sharing initiatives to target fraud, including the establishment of the ‘askCUE’ PI enquiry service. We served on the Personal Injury sub-group of the Insurance Fraud Taskforce and we were one of the stakeholder representatives on the MoJ’s Whiplash Reform Steering Group and its four sub-groups.

3. Since the formation of the Official Injury Claim (OIC) Portal in May 2021, we have served as a member of the OIC Advisory Group, along with other industry stakeholders. Most recently MASS and APIL were given permission by the Court of Appeal to intervene in two cases to help establish levels of compensation to be awarded for ‘mixed’ whiplash injuries. The Court confirmed the crucial point of principle that full damages must be paid for non-tariff injuries, but we understand that insurers may appeal the decision to the Supreme Court.

Summary

4. The latest round of reforms which culminated in the Civil Liability Act (CLA) 2018 and the formation of OIC, began as a crusade against whiplash fraud and so-called frivolous or unmeritorious claims. The justification then changed to reduce the number of claims to an acceptable level and reduced costs to insurers by encouraging more unrepresented claims cutting out claimant lawyers who had previously managed to secure a higher/fairer settlement for claims. Having failed to facilitate more than a small minority of unrepresented claims, it is now claimed that at least the reforms have provided consumers with a greater “choice” about how they might pursue a claim for compensation.

5. The new claims process has surpassed its intended goals of reducing the overall number of minor personal injury claims and the costs of claims. Whilst supporters of the reforms may herald this success, we believe that this has unfairly denied motor accident victims the justice they deserve, the fair compensation that motorists pay for through their motor insurance and has financially benefited the insurance industry massively.

6. We believe that the reforms have fallen short in a number of areas:

a)   Motorists have yet to see – and in our view are unlikely to ever to see - the promised reduction in motor premiums resulting from the reforms; it remains our view that the anticipated savings from the reforms of £1.3bn (a substantial underestimate given the fall in the number of claims) have been subsidising an insurance sector faced with a range of other economic and financial shocks;

b)   The Government’s estimate of 30% or more of unrepresented claimants has fallen far short, with only 9% or fewer, of claims being self-represented;

c)   Although there have been significant improvements in recent months, our Members reported that the first year of OIC was characterised by major technical and IT problems that added significant costs and delays to the claims process; we believe that many of these issues could have been avoided by a more collaborative and open approach with professional users;

d)   We remain deeply disappointed that in August 2022 the MoJ rejected the Lord Chief Justice’s recommendation that an early review should take place of the tariff of damages, ahead of the full statutory review of the CLA 2018 in 2024, despite dramatic inflation pressures;

e)   MASS has consistently called for the need for a transparent sector governance structure as seen with Claims Portal Ltd, that is responsible for agreeing and making operational and process driven decisions as well as what data is collected and published.

What effect have the measures introduced within the whiplash reform programme had on the number of minor personal injury claims to date?

7. The number of minor personal injury claims made through OIC has fallen substantially since the implementation of the whiplash reforms. Whilst the new system was explicitly designed to reduce the number of fraudulent and ‘frivolous’ claims, it was never the stated intention to reduce the number of accident victims so dramatically.

8. It is MASS’s view that the combination of low volumes of claims and the low numbers of unrepresented claimants strongly indicates that many accident victims are either unsure about how to make a claim, are reluctant to make a claim without representation or are unable to pursue a claim through the OIC. Each of these conclusions carry concerns about the structure and fairness of the new claims process and need to be investigated thoroughly.

9. There were 289,619 claims submitted through OIC in 2022 (255,150 in the first year of OIC, between 31 May 2021 and 30 May 2022). Figures from MoJ suggest that there were a further 131,000 claims over the same period through Claims Portal, equating to a total of 386,000 RTA PI claims brought between 31 May 2021 and 30 May 2022. This compares to approximately 611,000 claims started through Claims Portal between June 2019 and May 2020 (including the early months of Covid restrictions).

10. With the Department for Transport’s historical estimates of reported and unreported total road casualties, particularly around injuries defined as “slight”, being consistently higher than the number of reported accidents to the police or claims being pursued, we continue to be concerned that very many genuine motor accident victims are either not choosing to or are unable to pursue the compensation that they are entitled to.

To what extent have these measures met the Government’s objective of reducing the cost of whiplash claims to the economy?

11. The Impact Assessment of the CLA 2018[i] and associated reforms, estimated that:

a)   Claimants would incur around £990 million in costs resulting from no longer receiving or reduced damages; motor premium holders would incur around £120 million cost in increased BTE premiums;

b)   Defendant insurers would save around £1.3 billion (gross) with an assumption that around £1.1 billion (85%) of these savings would be passed onto consumers in the form of lower premiums, leaving a net benefit for insurers of around £190 million.

c)   The IA assumed “a baseline volume of around 515,000 financially settled RTA PI claims per annum in the future” (page 14).

12. As set out above, claimants would incur a reduction in compensation of around £990m. Given that there have been substantially fewer claims - 386,000 RTA PI claims with only 255,150 through OIC (although only 28,639 claims were settled) between May 2021 and May 2022 – it could be assumed that the reduction in claims by motor accident victims was substantially higher, although this might reasonably be partially offset by reduced or changed driving behaviour during the pandemic.

13. However, on the current levels of only 8,000 claims per month reaching settlement - only 64,137 claims having reached settlement between June 2022 and February 2023, with a likely annual number of around 88,000 in the second year of OIC - the reduction in claims costs will far exceed the estimated defendant insurer savings of £1.3 billion, by potentially several multiples.

14. With short-term falls in motor premiums during the pandemic now in the past, motor premiums rising dramatically and reported profits from publicly listed insurance companies falling, it is MASS’s view that motor accident victims are effectively subsidising an insurance sector faced with a range of other economic and financial shocks and structural changes in the motor market (eg. more technically advanced and so expensive motor vehicles to repair).

To what extent are any savings being passed on to motorists through lower insurance premiums?

15. There is no evidence that the savings from the reforms are being passed to motorists. The reality is that few have ever believed that consumers will see any of the £1.1 billion of anticipated savings.

16. Insurers must pass on savings from the reforms to motorists through lower insurance premiums under provisions included in the CLA 2018. Insurers must report on their compliance with this commitment to the Financial Conduct Authority by 1 October 2023. Following this, the Government will publish and lay a report on the outcomes in Parliament as close to April 2024 as possible. However, the government has always admitted that it ultimately has no mechanisms to force insurers to pass on savings to consumers.

17. Although car insurance fell during the Covid pandemic, motor premium prices surged in 2022, significantly higher than inflation; by 19% according to the Confused.com Car Insurance Price Index[ii] and 17.4% according to the Consumer Intelligence Survey[iii].

18. The insurance sector has always had a poor history of passing cost savings to consumers; promised savings following the LASPO reforms were short-lived and soon rose to previous levels.

19. The best that the insurance industry will likely offer is that premiums will not rise as fast as they would have done so without the reforms. Appearing before the Justice Select Committee on 7 February 2017[iv], James Dalton, then Director of General Insurance Policy at the Association of British Insurers (ABI), said:

“Civil litigation reform is not done in isolation to the wider economy and wider market….

Those costs will be passed on to consumers through higher car insurance premiums….

What I can say is that premiums will not go up as much if these personal injury reforms are implemented.”

20. Despite all the protestations about savings from the reforms and the competitive nature of the insurance market, consumers are very unlikely to see any savings. Insurers continue to blame an assortment of reasons for reduced profitability from motor insurance.

What have been the effects of raising the small claims track limit from £1,000 to £5,000; the ban on settling whiplash claims without medical evidence; and the fixed tariff of compensation for whiplash injuries that last up to 2 years?

21. We believe that increasing the small claims track limit from £1000 to £5000 has had a disproportionate impact upon vulnerable groups of society. People on lower incomes will have likely lost access to justice as they will not be able to fund their own litigation costs and will not have opted to have legal insurance in order to reduce the cost of their motor insurance.

22. Since day one it was argued that RTA claims are simple and straightforward, and that lawyers were simply an unnecessary cost in most cases. The reality is that even low-value claims often involve a degree of complex legal arguments and medical uncertainties. We believe that a significant reason why 90+% of claimants continue to use legal representation is at least partly down to the complexity of the system.

23. Our fears that Claims Management Companies would enter the market in large numbers have not yet been realised, but with full digital onboarding with OIC still to be resolved, it is too early to say that this will not happen in the future.

24. We fully supported the ban on settling claims without medical evidence.

25. MASS has consistently argued that the implemented tariff regime:

a)   Is far too low - the fixed tariffs are significantly lower than those set out in the Judicial College Guidelines and should better reflect the levels of compensation previously awarded by the courts;

b)   is unfair and unreasonable for accident victims suffering long periods of pain and discomfort, comparable to or below amounts in compensation for flight or train delays;

c)   effectively means that an award for the same injury suffered by the same person, but suffered when driving a car is valued significantly less;

d)   causes disparity and unfairness between: claimants in the same accident who have different kinds of injury; between claimants with the same injury suffered in different circumstances; and between claimants with the same injuries whose symptoms last for slightly different periods;

e)   does not recognise the pain and suffering caused to accident victims; and has detrimentally impacted the ability of potential claimants to engage legal advice and has led to a clear inequality of arms;

26. The low tariff regime has meant that many claimant solicitor firms conducting relatively small numbers of claims have simply been unable to make the work economic and so have turned away from RTA PI claims.

Why most claimants continue to use legal representation when using the online portal (90% since its launch)?

27. It is positive that solicitors, many of whom are our members, are still able to support claimants through the complex process of pursuing a low value RTA claim, and that it is clear that claimants themselves recognise the added value delivered by solicitors. Many of these 9% are in fact being supported through the process by their own insurers, so the real figure for claimants navigating the OIC without assistance is even lower.

28. We suspect that the only reasons unrepresented claimants are doing reasonably well in damages levels is (a) that insurers are being more generous with them to get their claims settled and/or to avoid FCA complaints and (b) some insurers are fighting harder with represented claimants to make life more difficult for professional representatives and try to drive claimant solicitors out of the market.

Whether the OIC portal is accessible and easy-to-use for claimants and/or their legal representatives?

29. MASS members report that the web interface of the OIC portal works satisfactorily and the fact that 15,201 unrepresented claimants have been able to reach settlement through OIC since its launch suggests that it is a workable ‘web-based’ system.

30. However, although there have been significant improvements in recent months, our members reported that the first year of OIC was characterised by major technical and IT problems that added significant costs and delays to the claims process for professional users.

31. With over 90% of claims still being handled by professional users, it is essential that professional users have an efficient and seamless system integration to manage claims to keep costs at an affordable level following the removal of recoverable costs.  We continue to hear that both lawyers and insurers are continuing to experience major problems with the A2A interfacing. This is especially the case for law firms handling high volumes of motor claims. Though many are reluctant to admit it publicly for fear of reputational damage, many are still having to resort to manually inputting and managing claims, which is grossly inefficient rendering little chance of making the process cost effective.

32. We believe that many of these issues could have been avoided by a more collaborative and open approach with professional users. It is absolutely vital that OIC is provided / used as a fully integrated process like Claims Portal to ensure efficiency for the user and ultimately the accident victim. Presently there is a clear two-tier issue evolving between professional users and unrepresented claimants, with insurers treating the latter differently.

Whether claims brought using the OIC are being settled in a timely manner, if timeliness could be improved upon; and if so, how?

33. The settlement of claims through OIC is taking considerably longer than under the previous claims process and delays in settlement have steadily increased, likely due to the IT issues.

34. Since the launch of OIC there has been a clear disparity in the average number of days to settle a claim between unrepresented and represented claims. It takes twice as long to settle a represented claim:

a)   For unrepresented claimants:

An average of 45 days in Q3 2021

69 days in Q4 2021

89 days in Q1 2022

100 days in Q2 2022

116 days in Q3 2022

122 days in Q4 2022 and

125 days in Q1 2023 (only January and February data available).

b)   For represented claimants:

An average of 61 days in Q3 2021

115 days in Q4 2021

158 days in Q1 2022

188 days in Q2 2022

220 days in Q3 2022

241 days in Q4 2022 and

253 days in Q1 2023 (only January and February data available).

Whether the OIC ensures access to justice for everyone who may seek to make a claim?

35. For the reasons set out previously, we do not believe that OIC and the new claims process ensures access to justice for every genuine motor accident victim. This in large part is not the fault of OIC but rather a flawed process in concept and formation and shortcomings in the CLA 2018 and the subsequent Civil Procedure Rules and Pre-Action Protocol for RTA PI claims.

How widely known is the OIC and how are potential claimants made aware of its existence?

36. We have no empirical evidence but our experience is that there is a very low awareness amongst accident victims about the existence of OIC. In the complete absence of any marketing campaign, there has been a reliance upon interested parties and stakeholders to signpost accident victims to OIC. Despite assurances to this Committee by a MoJ Minister (16 January 2018[v]), the third sector has had zero support from government and no funds or resources, outside of the OIC helpline, have been allocated to guide or advise unrepresented claimants. For instance, Citizens Advice regularly forward the majority of inquiries relating to RTA claims directly to MASS[vi].

How effective is the OIC portal in settling claims for mixed injury claims, which cannot be settled using the fixed tariff awards?

37. Some 31,412 claims for mixed injury claims have been settled within OIC under the mixed tariff, but there continues to be considerable legal dispute about how mixed injury claims should be settled under the new claims process.

38. It was hoped that the recent Court of Appeal (CoA) judgment on damages that involve mixed injuries within OIC would provide greater clarity about how compensation should be calculated, where the claimant has suffered both a whiplash injury and one or more non-whiplash injuries.

39. The absence of any regulatory guidance on mixed injuries from either government or Parliament was one of the glaring holes in the whiplash reforms. Instead, the job of sorting it out was passed to the judiciary. This hole in the new regulatory structure has undoubtedly led to delay in a number of claims settling and the risk of under-compensation.

40. In a majority decision, the CoA agreed that damages for a whiplash injury should be calculated in accordance with the tariff and that an award for a non-whiplash injury should be assessed on common law principles, and that the judge should then “step back” and apply a discount for overlap, broadly along the lines applied in the initial first instance judgment.  The CoA said that the discount should not leave the claimant with an award for the non-whiplash injury lower than the valuation of that injury.

41. Insurers have decided to appeal the CoA decision, although we understand that the sector is not united behind this approach. Given the potential delay of months, if not years, this will be disappointing news to both those claimants and defendants who wanted some clarity about how to value tariff and non-tariff injuries. The Supreme Court now needs to decide whether they give leave of appeal. If, however, an appeal does go ahead in the Supreme Court, we will seek permission to intervene not least because the CoA judgment left some of our key concerns unaddressed, subjecting injured people to ongoing uncertainty.

Any other issues in relation to the implementation of the whiplash reform programme and operation of the OIC to date

42. MASS has served as a member of the OIC Advisory Group since May 2021, along with other industry stakeholders. We have greatly appreciated having been invited by MoJ to join this group, despite our well-known scepticism about the reforms.

43. We have consistently called for the need of a transparent sector governance structure as seen with Claims Portal Ltd, that is responsible for agreeing and making operational and process driven decisions as well as what MI and data is collected and published. The appointment of voluntary board members from across the sector would provide a deeper level of co-operation and the benefit of collective wisdom and experience from across the sector.

44. Presently, whilst MoJ oversees policy, it has little or no knowledge or involvement in day-to-day operation of the OIC. OIC, being run and managed by the MIB who are purely financed by the insurance industry, is not providing a fully independent and transparent operational governance structure.