Fleet News

Victims 'may suffer' as Government bids to deter whiplash fraud

accident

Measures intended to disincentivise minor, exaggerated and fraudulent whiplash claims will leave some claimants short-changed, legal experts have warned. 

Lawyers are particularly concerned about raising the limit that a small claims court can deal with, from £1,000 to £5,000, where legal advice will not be readily available.

Deborah Evans, chief executive of the Association of Personal Injury Lawyers, said: “We have to focus on the reality that fraud is a tiny percentage and people who have been genuinely injured deserve to be properly looked after.”

Speaking at the Motor Insurance Summit, organised by Marketforce, Evans explained how compulsory motor insurance was introduced to ensure somebody who has been injured negligently is adequately compensated. However, she told delegates: “The reforms we’re looking at now actually strip that away completely.”

The Government believes low-value personal injury claims are not so complex as to routinely require a lawyer. However claimants are not, and would not, be stopped from seeking legal representation. Furthermore, the Ministry of Justice (MoJ) said support for litigants will also be available from advice organisations and online sources. 

However, it added that “the price paid by all motorists from the continuing high number and cost of these claims is too great, and it is right for the Government to take firm action to reduce the financial burdens on consumers”.

Figures from the Department for Work and Pensions show there were around 770,000 road traffic claims in 2015/16, compared to 460,000 in 2005/06, of which around 690,000 (90%) were whiplash or soft tissue neck/back injuries. 

Against a backdrop of increasing litigation, the measures, contained in the Prisons and Courts Bill, hope to build on previous legislation aimed at bringing these numbers down. 

The Legal Aid, Sentencing and Punishment Act (LASPO), which became law in April 2013, banned referral fees paid by lawyers and limited the amount they could charge for handling whiplash injuries. Whiplash claims fell by 19% as a result, according to the Institute and Faculty of Actuaries.

New rules were also introduced in October 2014, which limit the fees that can be paid to doctors for whiplash reports.

However, fraudulent claims have remained an issue for the industry and fleets, like private motorists, have faced increasing premiums as a result. In fact, two-thirds (67%) of respondents to a Commercial Fleet poll said they had seen their insurance costs rise. Just one in seven (14%) had seen them fall. 

A doubling in the rate of insurance premium tax (IPT) over the past two years, from 6% to 12% (effective from June), will have also driven up costs. But, after suffering a backlash over the new formula for calculating payouts in personal injury claims, fleets could be spared further premium pressure in the longer term, after the Government launched a review.

It was sparked by a change to the ‘discount rate’ used to work out how much insurers should pay to victims of major accidents. 

Courts calculate compensation based on a loss of earnings and the cost of care. But they also adjust the lump sum payout to take account of the interest on the money which victims with life-changing injuries are likely to earn over time.

The justice secretary Liz Truss announced plans to cut the rate from 2.5% to minus 0.75% as it is linked to Government gilts which are paying out negative returns.

David Johnson, a partner at Weightmans LLP, said: “This will drastically increase the size of lump-sum payments across the scale of serious personal injury cases.

“Taking the example of a £9 million case, of which £8.2m relates to future losses and expenses, the new discount rate of -0.75% would more than double the value of the claim to a cost of just more than £20m.”

Under the proposals unveiled as part of the six-week review, an independent body instead of the Lord Chancellor – a role Truss also holds – could set the discount rate in the future. 



Click here for fleet insurance best practice and procurement insight

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Comment as guest


Login  /  Register

Comments

  • Iain - 25/04/2017 20:40

    Payments for whiplash claims are, in the main, an absolute joke and are simply exploited to penalise, in many cases innocent drivers. Modern vehicles have many safety features built in and a simple slow speed rear end bump, which will almost certainly result in a claim for thousands of pounds, cannot be justified. It would be far better to tackle the root cause and penalise the careless driver with automatic penalty points on their licence where they are at fault. This would then automatically increase their insurance premium and not place the burden of compensation across innocent motorists. Those found to be making unsubstantiated and/or exaggerated claims should also be penalised. Lastly, the legal profession get paid far too much to pursue these minor claims, many of which are hidden behind alleged soft tissue or neck injuries. It is regrettably big business and the medical profession, whilst perhaps overworked, seem to willingly or unwittingly, collude and add credence to false claims. Deborah Evans statement “We have to focus on the reality that fraud is a tiny percentage [of claims] and people who have been genuinely injured deserve to be properly looked after” is all about making money for her profession, nothing to do with reality and, given no one really polices or investigates a sufficient number of claims, I seriously anyone can realistically state fraudulent claims are a tiny percentage. I deal with insurance claims every day and regularly see inflated repair and rental costs, all of which are spurred on by our legal 'profession'. Please wake up and smell the coffee...

    Reply as guest

    Login  /  Register
Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee