Whiplash reforms - beneath the headlines
On Thursday the government’s proposals on low value RTA, employers and public liability claims were published. In a market holding its breath for the Lord Chancellor’s announcement on the discount rate these provided a moment of welcome distraction.
Although the media headlines continue to refer to “whiplash reforms”, the detail of the government’s proposals shows that it has pulled back from its initial goal of banning whiplash claims. When George Osborne announced his intentions in October 2015, the increase in the RTA small claims track limit held the attraction of simplicity of implementation. By contrast the logistics of reversing whiplash out of prevailing law while preserving the right to compensation for other types of bodily injury, and the associated requirement for primary legislation, seemed destined to struggle due to complexity. The government has explained that it has listened to feedback in the consultation process.
The middle path is now favoured, in the form of the tariff system for short term whiplash and minor psychological consequences. A scale of general damages is proposed based upon time bands relating to the length of injury. The lowest band in the scale is 0-6 months and thereafter the bands are in three month increments ie 7-9 months, 10-12 months and so on up to 24 months. It is worth highlighting that with increases in awards of 40% or more available between bands, and the narrowness of the time bands, the sensitivity to prognosis is obvious. Insurers will no doubt be sharpening their intel analysis of prognosis, expert and claim source in response.
Since the introduction of contingent fees an industry has developed to exploit “opportunity” in personal injury claims and this has generally moved one step ahead of the legislative environment - as one door closes, another hole is knocked through the wall. We need look no further than what happened to the perceived benefit of reduction in premiums following LASPO. The new proposals to increase the small claims track to ￡5,000 for RTA carry no associated deterrent to CMCs or McKenzie Friends replacing solicitors in mining this seam. The proposals need the foresight to control additional costs being added to inflate claims above the limit or to replace lost revenue, for example through excessive rehabilitation charges. With their greater complexity, the employers and public liability limits will only increase to ￡2,000.
In the event of an increase in the number of litigants in person insurers will be thinking about the implications for the current claim notification process. Effective triaging of new claims has been critical in controlling personal injury claims and of all the implications of the proposals this could emerge as the most important one to prepare for.
Of course, filling the blank page is a far harder job than passing comment. In crafting changes aimed at implementation by October 2018 we need to hope that the government is able to anticipate the response to the changes in the subsequent 3 or more years and to futureproof its intentions. The devil is in the detail rather than in the headlines.