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APIL: whiplash reforms risk chronic undersettlement by insurers and new CMC feeding frenzy


Whiplash: solicitors increase award by 60% from first instruction to settlement

The involvement of a lawyer in whiplash cases means that the final settlement is around three times the figure initially offered to a claimant before they sought legal help, according to research by the Association of Personal Injury Lawyers (APIL).

It also warned the government that its plan to increase the small claims limit for personal injury (PI) cases will give claims management companies (CMCs) a new lease of life and risk a re-run of their intrusive advertising for payment protection insurance mis-selling.

The poll of 190 members was conducted as part of APIL’s response to the government’s whiplash consultation, which closed last week and proposes raising the small claims limit for PI cases from £1,000 to £5,000 and introducing independent medical panels.

Illustrating the risk of under-settlement where a lawyer is not involved, the survey said that in whiplash cases insurers offered unrepresented claimants a mean average of £1,064, which rose to £1,988 when a lawyer first became involved, before finally settling at £3,173. The median figures were £1,000, £1,750 and £2,875.

Where whiplash formed part of a claim where other injuries were also suffered, the presence of a lawyer took the final award to 150% of the first offer made to the claimant when unrepresented. The mean average first offer was £1,570 and the final settlement £4,195.

Insurer research, by contrast, has previously said that they pay as much to unrepresented claimants as they do to those with legal representation.

The survey also indicated that road traffic claims worth between £1,000 and £5,000 are not solely for whiplash-only injuries, and that if the small claims limit was raised to £5,000, virtually all road traffic claims would fall within it.

Nearly two-thirds of cases (63%) settled pre-issue but after the medical report. “Assuming these cases were to be dealt with under the small claims court procedure, the injured person would have to get their own medical report in the future,” APIL said. “Without this medical report, it is debateable whether defendants would be incentivised to settle the case.”

The survey also highlighted the range of complexities arising within low-value road traffic cases – such as rehabilitation, special damages, the need for more than one medical report and facts in dispute – that would make them unsuitable for the “straightforward and simple” cases for which the small claims track was designed, APIL said.

The association’s response to the consultation took issue with many of its underlying assumptions and opposed any change to the small claims limit, arguing that inequality between an unrepresented claimant and defendant insurer “will almost certainly occur”.

On medical panels, it rejected the creation of “a monopoly of service providers” – noting the practical difficulties around who would control them – and said accreditation would be a better approach while maintaining the claimant’s choice of medical expert.

APIL warned that moving the majority of claims to the small claims track will “reduce the number of genuine claims, but it will not stop fraud”, because people are likely to turn to CMCs to conduct their claims, probably by way of damages-based agreements.

“A window of opportunity will therefore be opened to CMCs. Representing people in the small claims court will become their next business model. The texting and advertising that is currently synonymous with CMCs will focus on encouraging people to make claims for whiplash. This has the potential to drive up the number of fraudulent claims, rather than help to reduce them.

“We believe that such CMCs will not deal with claims to the same standard as a trained and skilled legal representative, and will be likely to accept the first pre-medical offer made by the insurer, as they will fail to investigate properly. Insurers will take advantage of CMCs just wanting a quick and easy settlement. This will leave the claimant largely under compensated in such cases.

“On top of this, CMCs charge fees of up to, or in some cases more than, a third of the overall compensation awarded to the claimant…

“The involvement of CMCs is likely to result in more exaggerated claims being brought as cold calling, texting, and advertisements encouraging people to claim for whiplash will become even more prevalent. The government can expect similar levels of intrusive advertising for such claims as it currently sees for payment protection insurance claims.”