Written evidence from Ageas Insurance

 

About Ageas

Ageas is a leading provider of award-winning insurance solutions in the United Kingdom. It distributes Personal and Commercial products through brokers, affinity partners and its own brands. Ageas UK holds a 50.1% share in Tesco Underwriting, providing home and motor insurance to Tesco Bank customers. Insuring around seven million customers and working with a range of brokers and partners, Ageas is recognised for delivering consistent and high-quality customer experiences. 

 

We are grateful to be able to respond to the JSC inquiry into Whiplash and the Small Claims Track and are able to comment, as a supplement to the response given to the Ministry of Justice consultation in January.

 

Executive Summary

 

  1. The definition of ‘whiplash’ set out in clause 61 of the Prisons and Courts Bill requires refinement, to ensure there are no unintended consequences arising out of such a narrow definition. The government stated aims of removing £1bn of cost from the process is at stake, should the definition of included claims not be sufficient to avoid circumvention.

 

  1. The reforms should be taken in context of the wider view, whereby vehicle and road safety is improving, fewer accidents are occurring, despite more miles being driven, leading to fewer injury claims overall, yet the proportion of claims which remain for whiplash and other soft tissue remains higher than 10 years ago.

 

  1. The overall aim of the planned reform was to remove fraudulent and exaggerated claims, which would in turn lead to reduction in cost to the honest motorist through reduced premiums. The reforms may lead to a reduction in cost, through the tariff and SCT increase, but might not lead to a significant change in behaviours; indeed through the opportunity for claims management companies or other un-regulated parties to become involved in the new reformed process, we may see even more fraudulent and exaggerated claims presented.

 

  1. The lack of an objective test to prove whether a claimant has a whiplash claim or not, coupled with the Judiciary not being prepared to challenge the claimant’s evidence in court very often, means that it becomes ever more difficult for an insurer to defend the claim presented. The tariff will reduce the amount a claimant can receive for minor injuries but the nature of the PSLA bands means it becomes ever more an incentive for the claimant to exaggerate their period of pain and suffering to receive a higher (although more modest than current) settlement.

 

  1. The independent medical report process, as administered by Medco will have to be empowered to take swift action to identify and remove accreditation from experts who are seen to have increased prognoses in order that the claimant might benefit from a greater award under the tariff, or engineer a claim outside of the tariff.

 

  1. The claimant must be at the heart of any planned change to the Small Claims Track, be it for RTA or other claims. The process to present a claim must be simple and transparent and have no incentive for the defendant not to engage with it. A process similar to the current claims portal should be devised, but it should include a mechanism to resolve disputes, be they over liability for the claim or quantum, whether or not liability is admitted.

 

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

  1. Clause 61 of the Prisons and Courts Bill provides a definition for ‘whiplash’ as “an injury, or set of injuries, of the neck or the neck and upper torso”. Our understanding of ‘upper torso’ would be to exclude injuries to the back, which is a common feature of low value ‘whiplash’ injuries.

 

  1. Paragraph 9 of the Government response to the consultation made it clear that it was vital that the exact scope of the reforms is defined. It also acknowledged that it was necessary to guard against attempts to circumvent the rules and take forward claims outside of the definition.

 

  1. Our internal data shows that, using the current definition of ‘soft tissue injury claim’ as set out in the Pre Action Protocol 1.1 (16A) around 90% of claims would fall within the definition and fall into the proposed tariff process. That definition was introduced as part of the government reforms as a way of defining whiplash with a view to avoiding displacement into other injury definitions. It also formed the basis of the impact assessment developed alongside the latest consultation, which sought to deliver £1bn of savings.

 

  1. Were a narrow definition to be applied, capturing only injuries to the neck, two things will happen:

 

  1. Firstly, using existing data, only around 37% of current cases would fall to be dealt with by the tariff process. The remainder would have an element of tariff and non tariff injury with around 10% falling entirely outside of the tariff.

 

  1. Secondly, claims will be displaced from the 37% currently defined as ‘neck or upper torso’ into the back definition, meaning even fewer claims being settled within the tariff.

 

  1. This will have a significant impact on the ability to deliver the government planned savings, or to pass on those savings to the motoring consumer.

 

  1. We have already seen claims being re-labeled from ‘whiplash’ into ‘neck and/or back’. This would continue with a significant incentive to re-label even more claims. Whilst the defendant has a responsibility to report the claim to the Compensation Recovery Unit (CRU) the injury descriptor used is taken from the Claims Notification Form (CNF) which is completed by the claimant. We have seen a shift from use of the word ‘whiplash’ to ‘neck and/or back’ over the last 5 years and this is reflected in the published data which shows a drop in ‘whiplash’ reported claims at the expense of claims for neck/back injuries.

 

  1. The current Medco definition, as set out in the PAP is simple to use, widely known and provides a vehicle to deliver the planned savings. If this definition is not to be used any definition must be wider than just neck and upper torso, so as to include all injuries to the spinal area, from neck, shoulders and back, upper, middle and lower.

 

  1. In relation to psychological injuries, the current proposed reform is necessary and proportionate to ensure that claims which are currently labeled as minor physical injury do not become displaced into psychological ones in order to circumvent the tariff reforms.

 

  1. Claims for injuries caught by the current definition continue to be out of proportion to both the number of accidents on our roads and the improvement in vehicle and road safety which has been seen over the last 10 years. Government reforms, such as LASPO Act 2012, whilst initially saw a reduction in claim numbers, they have risen to close pre-LASPO levels. Both data from Compensation Recovery Units and Claims Portal evidences the fact.

 

  1. The total number of ‘whiplash/neck/back’ claims submitted to CRU in 2015/16 decreased by only 0.3% from the year 2013/14 and increased 1.2% from the previous year 14/15). The proportion of claims defined as whiplash dropped as the number described as neck and/or back increased.

 

 

 

Whether or not fraudulent whiplash claims represent a significant problem and, if so, whether the proposed reforms would tackle this effectively

 

  1. Fraudulent whiplash claims remain a significant problem, although it is necessary to understand and differentiate between opportunistic exaggeration and highly organised groups of fraudsters undertaking ‘crash for cash’ type scams. Whilst there remains money to be made in the system the organised fraudster will continue to operate, albeit changing his MO to maximise profit in less regulated areas. The proposed reforms will do little to change the attitude of the organised fraudster but as an Insurer committed to protecting the innocent; we would look to fight such claims where there was a compelling case of fraudulent behaviour.

 

  1. For the opportunist exaggerator, the situation is quite different. The lack of an objective test to prove whether a claimant has a whiplash claim or not, coupled with the Judiciary not being prepared to challenge the claimant’s evidence in court very often, means that it becomes ever more difficult for an insurer to defend the claim presented. The tariff will reduce the amount a claimant can receive for minor injuries but the nature of the PSLA bands means it becomes ever more an incentive for the claimant to exaggerate their period of pain and suffering to receive a higher (although more modest than current) settlement. The removal of costs from the process, in terms of reducing awards for PSLA and legal costs for representation, ought to go hand-in-hand with improvements to medical evidence.

 

 

  1. The tariff will remove some financial benefit in pursuing very small claims, as the incentive to do so is limited to a few hundred pounds. However the incentive for Claims Management Companies to delay medical examination in order to maximise the possible prognosis period should not be ignored. A claimant who is examined at 13 months and is ‘just recovered’ will receive a fixed award £630 more than a claimant who is ‘just recovered’ at 12 months. This, to a CMC who is engaged on a Damaged Based Agreement could mean an additional £150 in fees for the claimant waiting just a few weeks.

 

  1. The independent medical report process, as administered by Medco will have to be empowered to take swift action to identify and remove accreditation from experts who are seen to have increased prognoses in order that the claimant might benefit in this way. It is important that a benchmark is established long before the reforms are implemented with which to measure accreditated experts against.

 

The provisions in Part 5 of the Bill introducing a tariff to regulate damages for RTA-related whiplash claims, with uplift in exceptional circumstances; and banning the settlement of claims without medical evidence.

 

  1. The benefit of having a fixed tariff is the certainty and relative simplicity for the claimant, meaning that litigants in person can engage with the process without requiring representation. Having a discretionary uplift in exceptional circumstances will lead to confusion, as well as opportunity for litigation to receive relatively modest increases. The circumstance in which such uplift is likely to have impact is loss of amenity rather than pain and suffering. It would be usual for such loss of amenity to be compensated through special damages awards, rather than through general damages.

 

  1. The bill is clear that such discretionary uplift should not be the norm, and applied in specific, exceptional circumstances. We would support that view, and further suggest that it should be stated that it should be considered only where an award could not be made in special damages either.

 

  1. We support the removal of pre-medical settlements for tariff based injury claims, subject to the general comment regarding the definition of such claims made earlier in the paper. The reason that pre-medical settlements arose is not, as is commonly thought, an attempt to short settle claims but more due to the fact that medical evidence for soft tissue claims can often have very little evidential value, especially where the expert does not examine the claimant until they are fully recovered. The examination becomes little more than a narrative of the claimant’s story with no evidential way of rebutting it. The settlement process is simply delayed and extra cost is added, by way of the examination fee.

 

  1. By introducing a ban on settling claims without a medical report it is important that the process is further tightened so that evidence is obtained earlier in the process, so that a medical examiner has the chance to see the patient whilst they are still complaining of symptoms. That way, any prognosis will be evidential at least and afford the expert the chance to comment on the likely recovery period, based on physical examination and not just narrative.

 

  1. We would not advocate a ban in more complex matters where so called ‘pre-medical offers’ are made for entirely different purposes. In more complex claims, we are often faced with a claimant, represented by a solicitor, who is not prepared to disclose any medical evidence, as a tactic, often to build legal costs. An early tabled settlement offer is the only way we can progress the claim and is considered entirely reasonable. The ban on pre-medical settlements was always introduced to curb the low value whiplash type claims and to widen such a ban to all cases would be disproportionate to the problem.

 

The impact of raising the small claims limit to £5,000 for RTA-related whiplash claims, and of raising the small claims limit to £2,000 for personal injury claims more generally, taking account of the planned move towards online court procedures

 

  1. The proposed changes to the Small Claims Track are long overdue. In relation to RTA claims, it is right that the limit is not limited to ‘whiplash’ claims, however defined, as to do so would create another disparity in the process and allow incentive to engineer claims into a definition not caught by the change. To include all RTA claims will help to avoid such displacement.

 

  1. In relation to the change for other types of claim, this is seen as an inflationary uplift, as the limit has not been changed for nearly 20 years. It will have minimal impact on claims in that area as only the most minor injuries will fall within the £2000 limit, ensuring that the more complex claims will continue to have necessary legal representation.

 

  1. The claimant must be at the heart of any planned change to the Small Claims Track, be it for RTA or other claims. The process to present a claim must be simple and transparent and have no incentive for the defendant not to engage with it. A process similar to the current claims portal should be devised, but it should include a mechanism to resolve disputes, be they over liability for the claim or quantum, whether or not liability is admitted.

 

  1. The ‘Before the Event’ (BTE) market will need to adapt and change to accommodate the proposed reforms. Currently, BTE cover is provided as a relatively cheap add on to most insurance policies, but in an environment where legal costs would not be recoverable providers may have to look at more bespoke cover to provide access to advice for claimants.

 

The role of claims management companies in respect of these matters

 

  1. The opportunity for claims management companies or other un-regulated parties to become involved in the new reformed process is significant and great care must be given to ensure that claims are not simply displaced from a regulated entity (claimant lawyers) to un-regulated entities, such as McKenzie friends, for example.

 

  1. The report commissioned by government and undertaken by Carol Brady highlighted many of the issues surrounding claims management companies and, in particular, we were pleased to see the regulation move from the Claims Management Regulator to the Financial Conduct Authority. However, this process is to be delayed until at least 2019, according to latest assessments, and so will not be in place to coincide with these expected reforms. This is a risk and will result in inconsistency in approach, leaving the door open for poor behaviours.

 

  1. Recent court reports[1] have demonstrated the level to which some Claims Management companies are prepared to go to engineer fictitious claims and we consider that additional regulation should be considered to completely outlaw all forms of inducement, including marketing fees, introduction fees and cold calling all of which have developed as ways to circumvent the ban on referral fees introduced in earlier legislation.

 

  1. These practices should not be confused with legitimate ‘Alternative Business Structures’ set up to benefit from the deregulation of legal services introduced by the Legal Services Act 2007. Consideration should be given to ensuring that those who are licensed to practice in this way do so in an entirely legitimate and legal way.

 

  1. If a CMC is to legitimately represent a claimant in the process they must not be able to charge more than a solicitor, nor able to recover more than is allowed under a damages based agreement, which, for a solicitor is capped at 25% of damages but for a CMC is unlimited. In addition, it must be the case that only one capped fee is payable per case, so that a scenario where a CMC charges a fee, then passes the case to a lawyer who similarly charges in duplicate, meaning the claimant is likely to lose more of their damages.

 

  1. Finally, the overall aim of the planned reform was to remove fraudulent and exaggerated claims, which would in turn lead to reduction in cost to the honest motorist through reduced premiums. The reforms may lead to a reduction in cost, through the tariff and SCT increase, but might not lead to a significant change in behaviours; indeed through the opportunity for claims management companies or other un-regulated parties to become involved in the new reformed process, we may see even more fraudulent and exaggerated claims presented, as well as significant consumer detriment from the activity of these poorly regulated players.

 

 

31 March 2017

 

 

[1] https://www.lawgazette.co.uk/news/gang-duped-law-firms-out-of-390k-in-fees-for-false-claims/5060454.article