Whiplash proposals target fraudulent claims with increase in RTA small claims limit to £5,000

Grant: reduce costs while preserving access to justice

The government has today finally unveiled its long-awaited consultation on increasing the small claims limit for road traffic personal injury cases from £1,000 to £5,000, a move that would decimate the workload of many law firms.

The Ministry of Justice (MoJ) – which, as expected, has also proposed creating independent medical panels to diagnose whiplash – said the move “should make it more likely that fraudulent and exaggerated claims are challenged”.

In a consultation paper on reducing the number and costs of whiplash claims, justice minister Helen Grant said: “Our aim is to deter fraudulent and exaggerated claims and reduce the cost of dealing with whiplash claims while preserving access to justice.”

The consultation said: “Insurers report regularly that it is simply not rational to challenge many claims given that the value of the claim is often less than the costs of challenge. As such, the present arrangements might not provide the proper incentives to allow fraudulent claims to be tested properly.”

It said the government’s view is that many small-value whiplash claims are “relatively straightforward” and that the small-claims track “might be a more suitable venue in which to determine them than the fast-track. More complex and unsuitable claims could still be heard under the fast-track”.

An additional benefit is that it would be more economic for insurers to challenge fraudulent and exaggerated claims, it said.

Sample data from insurers indicated that the “large majority of claims” are for less than £5,000. The three options being consulted on are:

  • Increasing the threshold for whiplash claims to £5,000, although the MoJ said this could simply result in arguments over the classification of the injury;
  • Increasing the limit to £5,000 for all RTA PI claims, which it admitted could unintentionally bring “significantly complex claims” under the small claims track, although the judicial task of allocating a case to track “may militate against this”; and
  • Making no change, leaving it to the Jackson reforms – which will have “a significant beneficial impact on whiplash claims, by addressing the compensation culture and taking excess money out of the system” – to deal with the problem.

The consultation acknowledged three “primary risks” from raising the limit: a reduction in access to justice resulting from injured people either not claiming initially or not challenging rejections of valid claims; inequality of arms given the likelihood of a claimant being self-represented and up against a professionally represented defendant; and that, without representation, people with valid claims may be more likely to accept lower settlements than is fair for their injuries.

It said these risks are mitigated to an extent by greater support for self-represented litigants and by before-the-event insurance.

Further risks, the MoJ added, are that claims will be inflated to bring them into the fast-track, as well as of greater strain on judicial and court resources as more cases are challenged, “though this might be rebalanced in the longer term as fewer fraudulent or exaggerated claims are made”.

The consultation touched on the interaction with the RTA protocol and asked how any adverse effects on the protocol and portal can be mitigated, “including by considering whether small claims could be brought under the protocol in due course”.

On improving medical evidence, the MoJ said there are “widespread concerns that the nature of the injury and the challenge of diagnosis might both favour, at the margins of the area, giving a particular diagnosis.

“A further concern is that GPs, who frequently build strong relationships with patients and their families over many years, may find it difficult to decline to certify an alleged whiplash injury, even if there may be doubts about the diagnosis. Similarly, doctors who regularly receive work from legal service providers or insurers may be keen to retain a relationship with them.”

It put forward two broad models: an accreditation scheme, meaning only reports from accredited doctors or medical reporting organisations, submitted using a standard form, would be accepted as evidence in disputed claims; or a “national call-off contract”, where the government would create a national framework contract and medical organisations could bid to become an approved supplier under the contract, possibly on a geographical basis.

The consultation runs for 12 weeks and a response will be published in “spring 2013”.


    Readers Comments

  • Bill Willcocks says:

    I am surprised there is apparently so little concern from Defendant firms about this. Have they not twigged that if the number of claims is significantly reduced, the amount of work they can do will be significantly reduced as wellso their profits will drop?

    And I wish someone cleverer than me could work out the sums for loss to the exchequer arising from claims handlers and partners paying less tax and claiming more state benefits when they lose their jobs; against insurers paying only 21% corporation tax on the extra profit they will make as a result of lower claims.

  • Mark lavender says:

    A disaster for the claimant PI law firms who derive strong and stable cash flows in dealing with these type of cases, which in turn enable them to fund the long tail catastrophic injury cases, where significant fees are recovered. There appears to be no mention as to whether solicitors fixed costs are going to increase from the current £80.00?

  • Julie Carlisle says:

    The proposal to increase the small claims limit will capture all PI claims, not just RTA’s.

  • Chris Moore says:

    Thank you for your thoughtful and balanced post, Neil. I wish the consultation had the same balance, no proper data or clear explanation of how this would in fact reduce fraud. One of the options is that the small claims limit is increased to £5k in all road traffic accidents. If the Government truly want to tackle fraud in whiplash calims then why is it an option to penalise a motorcyclist who has an accident (but no whiplash)? Insurers will be more than happy to make pre-med offers in the knowledge that they are undersettling a claim and do not have to pay legal costs, so it could actually increase fraud?

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