Despite the fact that virtually every car in the UK is fitted with head restraints designed to prevent neck injuries, whiplash claims have been running at an epidemic level in the UK. Do we British people have softer necks than anyone else in the world? Or is the problem the number of injury claim lawyers, and the non-stop telephone marketing, TV advertising and even 'chugging' that they used to drum up business? However, proposed changes to the law may bring all this to an end.
How serious an issue is the 'compensation culture'?
The effect on car insurance premiums has been heavy with an estimated £35 being added to every motor insurance policy in the country to cover minor injury claims. There are certain blackspots where 'cash for crash' frauds have been concentrated, and as a result it is virtually impossible to get car insurance in certain parts of the country, particularly inner-city areas in the Midlands and North West of England. Innocent motorists are therefore being penalised by finding it more expensive or even impossible to get insured.
How can the government stamp out abuses?
Genuine victims who suffer pain and, sometimes, life changing injuries as a result of car accidents are entitled to compensation, which can usually only partly alleviate their sufferings. It is clear however that the system is being abused by a minority of fraudulent people, assisted by (again, a minority of) claims lawyers with high marketing budgets. The new Civil Liabilities Bill which is going through Parliament proposes the following changes:
(1) A new fixed tariff scheme for minor injuries
(2) A new system for calculating the discount rate (the so-called Ogden Rate)
(3) A ban on insurers settling claims without first seeing medical evidence that the claim is genuine
(4) Separate from this Bill, it is proposed to raise the limit for claiming for injuries caused by road traffic accidents in the Small Claims Court from £1000 to £5000.
How can these measures make a difference?
The new tariff system proposes lower maximum payments for minor injuries, based upon the length of time that the injury is likely to cause pain and suffering for. For instance, the proposed standard tariff for whiplash injuries which are expected to heal up within three months is £235; it is currently an average of £1800. This represents a reduction of 87%!
The tariff then increases on a sliding scale, with recovery lasting for up to a maximum of two years providing a standard tariff of £3910; this compares with an average payout at the moment of £4750. This is a reduction of 17%.
The court will have the option of increasing these tariffs by up to 20% if it is considered that the claimant's injuries are exceptional. As a result the more minor injuries will entitle the claimant to a far lower payment, whilst those with more severe injuries will find much less difference to current rates.
The discount rate
Someone who is severely injured injured in an accident, or as a result of someone else's actions, may need lifetime financial support. When a payout is made, this can be invested so as to provide an income for the future; and this has always been taken into consideration when calculating how much compensation is required. However, just how much income this will provide can vary considerably. Whilst interest rates are as low as they are at the moment, a very safe investment can provide very little or even no income.
As a result the assumed rate was reduced, in 2017, from 2.5% to -0.75%. This caused a sudden increase in the sums awarded; the shares of a lot of insurance companies fell considerably and premiums were hiked up generally. This figure is now being reviewed, with a proposal for a temporary rate of about 1%, and reviews every three years. This should result in lower payouts for serious injuries, which is bad news from the point of view of the injured parties who have already suffered enough; but good news for those who will see their premiums reduced as a result.
A ban on settling claims without medical evidence
A number of insurers have paid out on whiplash claims just on the say so of the victim. Whilst many of these victims have of course suffered genuine injuries, there has been a proportion who have been frankly fraudulent. However, the cost of fighting a claim can be extremely expensive and some underwriters have taken the view that it is difficult to disprove a whiplash claim, and they should cut their losses by paying out immediately. On the other hand, it is possible for genuine claimants to have suffered far greater injuries than they had first suspected, which would mean that they would suffer for longer, and would be entitled to larger payouts. The decision has been made to ban any professional person from settling a personal injury claim without the injured party presenting medical evidence to back it up.
The increase in the Small Claims Court limit
In the past any claim for more than a thousand pounds had to be dealt with at a full County Court hearing. This would involve both parties in heavy legal costs, and if the insurance company lost the case these costs would almost invariably far exceed the sum that was claimed in the first place.
This put a lot of pressure on the insurers to settle claims, even when the evidence for the claim was flimsy.
It will now be necessary for these smaller claims of up to £5000 (which would cover all whiplash injuries expected to cause problems for up to 2 years) to be settled in the Small Claims Court. These are quite informal hearings, at which it is not necessary for either party to have a solicitor. Whilst the claimant is perfectly entitled to be legally represented at a hearing, the cost of this representation cannot usually be claimed from the other side. This measure will greatly reduce the costs to the insurance companies of defending a case, and this alone has been calculated to reduce car insurance premiums by more than £1 billion.
To sum up ...
There are those who believe that we have a compensation culture which is out of control, and those who feel that people who have been injured as a result of the actions of others are entitled to fast, easy and substantial compensation to help them to get on with their lives. The proposed measures are intended to find a happy medium between these two extremes.