Written evidence from Motor Accident Solicitors Society

1.              The Motor Accident Solicitors Society (MASS) is the primary organisation of road traffic accident (RTA) solicitors representing the victims of motor accidents. We represent 120 solicitor firm Members throughout the UK, including approximately 2,000 claims handlers, who collectively handle an estimated 400,000 motor PI accident claims annually.

2.              For over 25 years, MASS has worked with the Government and other stakeholders on the regulatory issues impacting accident victims, regularly engaging with Ministers and officials at the Ministry of Justice. We helped establish both the Portal and MedCo and a MASS representative sits on both the Claims Portal Board and MedCo Board. We successfully negotiated with the ABI to set up the ‘askCUE’ PI enquiry service to combat fraud. We regularly engage with parliamentarians and have provided oral evidence to Select Committees on a number of occasions.

3.              The Government’s proposals will completely fail to protect the interests of most injured persons and raising the small claims limit for all PI claims and capping minor whiplash claims would present an opportunity to those who have historically sought to exploit the system, namely many Claims Management Companies (CMCs).

4.              The MoJ’s last round of reforms have still yet to be fully implemented and should be given time to work. MASS believes an alternative package of measures should focus on continued improved data sharing, early implementation of the Insurance Fraud Taskforce recommendations, implementation of the Brady Review into CMCs, given the legal powers there should be a ban on cold calling and texting, tough enforcement action against professional enablers, better enforcement of data protection legislation, continued action against uninsured drivers, improved driver education and graduated licenses, improved car design and telematics. Past cross-industry initiatives have demonstrated that so much more can be achieved by dialogue. The sector should be given time to discuss areas of possible common agreement.

5.              We await Part 2 of the MoJ’s proposals, but are concerned that action in the likely areas (physiotherapy and rehabilitation, credit hire, repair costs and CMC regulation) are unlikely to be progressed in the same timeframe and implemented on same date (1 October 2018) as the provisions in the Prisons and Courts Bill and the non-legislative proposals.

a)               The definition of whiplash and the prevalence of RTA-related whiplash claims

6.              The originally proposed definition for RTA-related soft tissue injuries was not fit for purpose and we welcome the acknowledgement that experts, including lawyers, the insurance industry and medically qualified experts, will be consulted on the definition.

7.              MASS is deeply concerned with the evidence base and the assumptions behind the proposals. The proposals are overly reliant upon insurance figures, which are not independent and have a vested interest in maximising the levels of alleged fraud, reducing the role of independent legal advice and maximising profits in a highly competitive insurance sector. The Government’s evidence base does not stand up to scrutiny.

8.              MoJ rely upon the number of claims recorded with the Department of Work and Pensions (DWP) Compensation Recovery Unit (CRU), which are unreliable because of potential over reporting. The more reliable statistic is the number of settlements recorded by CRU, because insurers are less likely to over report actual payments made. These figures include all pre-medical offers where people are offered compensation without any evidence of whiplash but having been designated so by an insurer claims handler.

9.              Whilst the number of motor PI claims rose substantially between 2005 and 2011, the number of claims has now fallen for four years in a row to pre-2010 levels. It should be noted that the number of PI claims was falling even before implementation of the LASPO Act reforms in April 2013.

10.              We routinely hear that whilst accidents are going down, PI claims are increasing.  This is incorrect. Most accidents are not reported to the police. The MoJ focus on the decrease in the number of RTAs reported to the police since 2006, appears to deliberately ignore Department for Transport estimates that between 2011 and 2015, around 460,000 “slight” injuries per year and around 60,000 serious injuries from RTAs went unreported to the police[i]. DfT’s central estimate of reported and unreported total road casualties is 710,000 per annum, substantially fewer than the number of settled motor PI claims. High excess charges for young drivers also contributes to non-reporting of accidents.

11.              The costs attributed to whiplash are entirely unsubstantiated and vary greatly (from Aviva claiming £93 per premium in 2015 to MoJ’s £40 per premium in 2016). They are provided exclusively by the insurance industry, despite their general adoption by both the Government and the media.               The true figures, according to ABI data (available from its website for a substantial fee), are that claims costs have fallen 29% since 2010 with the amount paid annually by motor insurers falling from £8.3 billion in 2010 to £5.89 billion in 2014 – a decrease of £2.41 billion.

12.              Between 1991 and 2010, the value of claims rose 116% but, after allowing for inflation, the ‘real’ increase was only 29%, and since 2010, the total value of motor claims has fallen[ii]. Legal costs have been falling for over ten years, having been fixed for RTA cases in 2003, reviewed (and negotiated with insurers) in 2010 and the LASPO cost reforms introduced in April 2013 further reduced legal costs by 60%.

b)               Fraud and whiplash claims

13.              MASS recognises the urgent need to tackle so-called whiplash fraud but this should not be at the expense of legitimate claims for justice. The proposed measures would adversely impact all RTA claims, regardless of whether they are absolutely legitimate. Even the insurance industry acknowledges that the vast majority of claims are legitimate. These measures are unfair, unjustified and will prevent accident victims from seeking the redress and justice they deserve.

14.              The Government’s prime justification for the proposals has evolved from tackling fraud to reducing the number of claims and the associated costs for the insurance sector in providing compensation. There is little or no evidence that these measures would either reduce fraud or result in insurers’ cutting motor insurance premiums. As Louise Ellman MP, Chair of Transport Select Committee, has said[iii]: “Overall I would prefer to see the Government place more emphasis on measures that make it harder for fraudulent claims to succeed. It would be a poor outcome and represent an injustice for genuine claimants if the overall level of claims fell but the proportion of fraudulent claims rose.”

15.              We do however strongly question the view that a high proportion of claims are fraudulent. The ABI’s “fraud” figure used by MoJ combines both proven (staged accident claims etc) and what it calls "suspected" fraud, where a claimant withdraws the application having been accused of fraud and/or when a claimant accepts (without a credible explanation) a substantially reduced settlement offer in respect of a claim.

16.              When the “proven” and “suspected” fraud figures are separated, the incidence of proven fraud (on the ABI’s own figures) dropped to 0.25% of all motor claims. Suspected fraud and actual fraud are not the same thing. Aviva’s Head of Fraud has said that they only “identified fraud on less than 1.9% of claims we received.” Solicitors – both claimants and defendants – report fraud is in the region of 1-3% of claims. Our view is that the majority should not suffer from being prevented from seeking justice and compensation for their injuries. The current system affords the Defendant a mechanism to challenge fraudulent cases.  A finding of fundamental dishonesty (only recently introduced) allows the successful Defendant to recover their costs.   It also discourages fraudulent cases to be pursued.  We would encourage Defendants to use this mechanism as a means of sending out a clear message.  Instead the insurance industry consider it more appropriate to target the genuine claimants. 

17.              In 2015 the insurance sector paid out compensation on 99% of motor accident claims. If they believe that so many RTA claims are fraudulent, why do they settle so many cases without any medical evidence and without challenging them in court? Not doing so – but supposedly saving on legal costs – has greatly fuelled the perception of ‘easy money’ and fraudulent activity.

18.              The insurance sector has a poor history of passing cost savings to consumers. The ABI has acknowledged that even with the proposed changes to the claims process, premiums will continue to increase. Claims that further increases in motor insurance premiums are due to fraud and whiplash claims should be treated with scepticism. There will always be another and another excuse for increasing motor insurance premiums. An average premium increase of £50-75 relating to the new Discount Rate for the severely injured has already been discussed, increases in IPT have and will continue to be directly passed on to consumers and there has been a recent 43% increase in repair costs.

19.              We reject MoJ’s notion that 85% of the suggested £1bn savings will be passed onto consumers by insurers through lower motor insurance premiums. Only three insurance companies (equating to around 20% of the market) have promised to pass on any savings to consumers. The Government has admitted it has no mechanism to force insurers to pass on the new supposed savings.

c)               Part 5 of the Prisons and Courts Bill

20.              We do not believe that the power of the courts should be limited to award damages for pain, suffering and loss of amenity for any accidents, regardless of whether they are for whiplash or another injury. The courts should retain their discretionary legal rights to consider the merits, or not, of each case.

21.              MASS objects to a fixed tariff scheme which removes the opportunity for judges to be flexible to consider individual circumstances and the fact that different people may be affected in radically different ways by similar injuries. The proposed tariffs are significantly lower than those set out in the Judicial College Guidelines.

22.              Clearly a fixed sum is preferable to no damages at all, but we cannot accept that the massive reductions proposed are reasonable. It should not be for the Secretary of State to determine the tariff levels and we would urge that the new fixed tariff levels would best be determined by the Judicial College. As the Association of District Judges (ADJ) has argued[iv], the proposed tariffs are “at much lower and seemingly arbitrarily as opposed to evidence-based levels than present.”

23.              The Government is effectively saying that it does not believe that compensation has been disproportionate across the board: only disproportionate for minor soft tissue injuries caused to occupants of motor vehicles. The mechanism of injury should not be a consideration.  Pain is pain and it is wholly inappropriate for a distinction to be made purely on the basis of a mechanism of injury.  It will cause 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 different periods. The award, up to £2,050 for a 3-month shoulder strain, suffered by a nurse at work is fit and proper, but an award for the same injury suffered by a nurse when driving her car is “disproportionate” and valued significantly less at £225.

24.              The proposed tariffs are comparable or even below other compensatory awards such as amounts in compensation for flight or train delays, holiday sickness and injury to feelings caused by discrimination awards.

25.              The inclusion of minor psychological injury claims is dismissive of the potentially debilitating nature of psychological injuries. It would entirely ignore any independent judicial assessment of the value of such claims.

26.              We agree that it should be for the judiciary to decide whether they should apply a discretionary uplift in the proposed fixed compensation payments. However, a 20% limit is not sufficient to cater for all circumstances.

27.              We fully support the pre-medical ban in relation to RTA claims and have long campaigned in favour of this issue.

d)               Raising the small claims limit and Litigants in Person (LiPs)

28.              The raising of the Small Claims Limit to £5,000 from the current £1,000 is neither reasonable nor fair and is entirely arbitrary. It far exceeds a figure that could be justified by any inflation-based calculation, which was the recommendation from Lord Justice Jackson[v].

29.              There will be a range of unintended and unwanted consequences as a result of the proposals. The small claims court is not suitable for personal injury claims as the complexity of handling these claims should not be underestimated. For example, few claimants would be aware of subrogation rights and may settle claims for their own losses without realising that they also have an obligation to recover sick pay advanced by their employers or payments made by their private health insurers. Most will not be aware of the possibility of waiting for a prognosis period to expire before settling their claim.  Some will settle their claim only to realise that they have been undercompensated.  Claimants will not be aware of the approach to quantification of special damages, for example loss of earnings and care. A failure to recover treatment costs will place greater strain on the NHS with physiotherapy charges.

30.              Raising the small claims limit will particularly adversely impact vulnerable groups – people on lower incomes, the disabled, the young, the elderly and those with poor or no digital access (still 12% of population according to Ofcom).

31.              We share the concerns expressed by the Civil Executive Team of the Judiciary of England and Wales[vi], led by Lord Justice Briggs, that the proposed reforms will undoubtedly lead to a “very large” increase in the number of Litigants in Person (LiPs) and that there will probably be increased burdens on the court service and judiciary. LiPs would probably mean longer hearings, delays in justice, longer waiting lists and higher costs. Even for lower value claims, the process can be confusing and complex.

32.              Claimants would not be able to find quality and independent legal support for their case. Advice received by LiPs from Defendant panel law firms is not independent – they will be acting in the best interests of their insurer client. There will be reduced access to justice and equality of arms – many accident victims will be put off by attending court against experienced insurers or representatives for the defence.

33.              There will be substantial costs to public finances including a loss of up to £162m to the NHS, £31m to DWP, loss of IPT on ATE and BTE policies, loss of VAT, corporation tax and PAYE, a reduction in court income, a potentially significant loss of jobs in the sector, an impact on healthcare sector and an impact on injured persons of having less money awarded.

34.              There will likely be an increase in the cost of BTE, if the current model can survive at all; the loss of Legal Expenses Insurance (LEI), certainly in its current form as legal costs will no longer be payable by the at-fault insurer but paid by the legal expenses provider; and the future role of the electronic claims Portal will be uncertain due to a removal of up to 90% of its current workload.

e)               The role of claims management companies

35.              The proposals will undoubtedly lead to an increased number of claims driven by CMCs, with fees deducted from the claimants’ damages and a potential increase in nuisance calls and spam texts as LiPs are encouraged to pursue claims. There could be an enhanced role for McKenzie Friends (paid or unpaid) at the expense of regulated professional legal advice.

36.              The net result is that those who pursue claims will receive less compensation at the expense of CMCs who will continue to invest income in marketing for claims. Accident victims could lose up to 40% of their damages in costs to CMCs.

37.              If the Government wants to stop this type of behaviour then CMCs should not be permitted to carry out the work that is currently done only by solicitors.

38.              We have great concerns that the Government is pursuing its agenda without having comprehensively introduced the recommendations of the Brady review into CMCs, which we would like to be tougher than proposed by this review.

39.              As the Claims Management Company Regulator is to be transferred to the Financial Conduct Authority, it must be properly resourced to regulate the activities of these companies. As this is unlikely to happen much before 2020 MASS has reservations whether the FCA will adequately and strongly regulate this sector, as it will be a relatively small element of their extensive remit. 

40.              We believe that injured people are best served and protected by being represented by a solicitor. It is vital that it remains practicable and affordable for claimants to have access to a solicitor, and that a situation is not created where solicitors, because of the higher cost of running a law firm compared to a CMC, exit the market. The cost of running a law firm of necessity includes matters such as the cost of effective regulation, full professional indemnity insurance for the protection of clients, and systems of staff supervision and training that will ensure that claimants receive a good service.

31 March 2017