Defection of claimant RTA lawyers to other areas of PI not happening, report finds

Rai: over-inflationary pressure on claims values

The widespread expectation that claimant firms would diversify away from road traffic accident (RTA) work into other, potentially more lucrative areas of personal injury (PI) has not proved to be the case, according to new research.

The report from national law firm Weightmans also said that the government’s plan to introduce a tariff for low-value RTA damages would remove the “inflationary involvement of the judiciary”.

The analysis of the PI market, based on claims portal data from 2015 and 2016, said that “on the basis of the available data, what is clear is that claims volumes are falling across the board which goes against assumptions that claimant firms are exiting the RTA claims sphere for the more lucrative claims generated in the EL/PL/disease arena.

“It could be that the focus for claimant firms is migrating to areas where fixed costs don’t apply, such as travel claims, professional negligence claims, etc.”

However, the research found that while claims volumes continue to decline across PI, general damages are going up.

The average value of road traffic accident claims rose by an above-inflation 3.4% over the period to £2,673, even though claims numbers dipped by 6.8%.

Pay-outs for small employers’ and public liability (EL/PL) claims increased by 10% and 12% respectively in the past two years, climbing to an average value of nearly £4,000 by the end of 2016.

But the number of EL claims fell by almost 8%, to fewer than 50,000 between January 2015 and December 2016, while PL volumes dropped by more than 12% to 64,000.

Weightmans said the figures were in line with the upward trend for personal injury claims values seen in recent years, although previous years had seen rapid, double-digit increases in claims values, so growth is slowing.

Bavita Rai, insurance partner at Weightmans, said: “The continuing, high increases we are seeing in the pay-outs awarded for injury claims is a cause for concern, indicating that an over-inflationary pressure on claims values remains an issue for insurers and their customers.”

But he added: “The overall decrease in claims volumes is encouraging and points to both the portal having its intended impact on claims-farming and the effect of improved health and safety practices across UK workplaces.”

Looking at the RTA figures, Weightmans’ head of motor, Chris Ball, said: “Whilst dysfunctional behaviours remain very much a daily issue for defendants, the reduction in claims volumes, whilst modest, could indicate that we are starting to see a positive impact of the LASPO changes.

“The proposed whiplash and small claims track reforms may well see claims volumes decline further. However, we are likely to see a spike in claims volumes immediately prior to the introduction of any new claims regime.”

The proposed introduction of a tariff system for RTA general damages “would undoubtedly result in a significant reduction in average general damages in the future”, the report said.

“A tariff-based system would be more transparent and readily understood by litigants in person, whilst at the same time removing the inflationary involvement of the judiciary in determining levels of damages in pre-litigation matters.

“The portal figures reflect increases in the [Judicial College Guidelines[, which are produced by reference to awards that have been and are being made by the courts in other cases. This goes to the heart of what drives the inflation behind the figures and is the reason why cutting the judiciary out of the equation should help to halt the upward trend.

“The tariffs will presumably be subject to future review but that is likely to be a more considered, collaborative and controlled process as opposed to the current ‘damages creep’.”

The figures showed that disease claim numbers for 2016 halved, which Weightmans speculated may indicate a “substantial decline” in noise-induced hearing loss (NIHL) notifications.

This reflected the wider trend in NIHL cases, whether they go through the portal or not. “Whilst final figures have yet to be collated by the insurance actuarial deafness working party, it is estimated that the market received 40,000 to 45,000 NIHL notifications in 2016 compared to approximately 85,000 notifications in 2015”.

The reasons included a crackdown on claims management companies and cold calling, the high ‘nil’ settlement rate that has led “several leading players either to diversify their business models into different areas outside NIHL and in some instances to relinquish their attachment to NIHL claims”, and possibly a shrinking pool of claimants.

The report added: “NIHL claims remain difficult to prove on all grounds – limitation, breach of duty and medical causation. Additionally, claimant law firms also face an insurance market which is essentially well marshalled to defend such claims.

“’Softer’ targets do exist – whether this is for claims for flight delays, travel sickness, financial mis-selling or vehicle emission failures.”

Further, general damages are falling in industrial disease portal cases, by 11% in 2016 to £3,760.

    Readers Comments

  • Alejandro says:

    “Looking at the RTA figures, Weightmans’ head of motor, Chris Ball, said: “Whilst dysfunctional behaviours remain very much a daily issue for defendants, the reduction in claims volumes, whilst modest, could indicate that we are starting to see a positive impact of the LASPO changes.”

    Presumably Chris is short for Crystal?

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