In a move which surprised many in the legal profession and the insurance industry the UK Ministry of Justice has confirmed that previously announced personal injury reforms have been (temporarily at least?) scrapped. These reforms were announced by George Osborne during his tenure as Chancellor of the Exchequer and while they provoked an array of differing comments they were on the whole seen as a positive move.
Personal Injury Reforms In Disarray
George Osborne had announced plans to increase the limit on small claims up to £5000 as well as abolishing compensation claims for minor whiplash injuries. The idea had been to increase the small claims limit to reduce legal costs going forward which are effectively passed on to customers via higher premiums. In a rather bizarre and confusing statement, the Ministry of Justice suggested that it still recognises that whiplash claims are too high, as are the associated legal costs, and would still pursue a raft of changes in the future.
It does look as though we will see a number of new reforms announced in due course but at this moment in time nobody has a clue what is going on and confusion reigns. The Ministry of Justice could and should have addressed this situation in more detail and given at least some degree of guidance.
Who Blocked The Changes?
At this moment in time, it is difficult to say with any real confidence who (if anyone) placed pressure on the UK government to backtrack on previously announced personal injury reforms. There are some who blame the legal profession, some the insurance industry while others are pointing the finger at claims management companies. The fact is that whether the UK government has come under increasing pressure behind the scenes or not there were still valid reasons for the suggested reforms going through.
The initial announcement of the reforms prompted a 50% fall in the share price of personal injury claims specialists Slater and Gordon. It was believed that the company would lose around 80% of its UK revenue under the suggested changes but where does this change in policy leave the company today?
Trying To Crack A Nut With A Sledgehammer
While all responsible parties in the legal profession, insurance industry and the personal injury claim management sector agree there is room for reform, did the previous reforms go too far?
There had been concerns that the quest to reduce legal cost payments, limit the number of frivolous personal injury claims and assist the insurance industry could impact genuine victims. The idea that the authorities were “trying to crack a nut with a sledgehammer” has gathered some traction which is perhaps partly behind the reason for the U-turn.
On one hand, there has already been a crackdown on the personal injury claims industry, we only need to look at the case involving Public Interest Lawyers, while on the other additional reforms have now been withdrawn. We can only hope that a new set of reforms are announced in the short term to fill this information vacuum which is causing confusion and concern right across the board.
What About The £1 Billion In Motor Insurance Savings?
It is rather amusing to see government departments backtracking on previously bold statements and reforms. After all, it was the Treasury which suggested that there would be £1 billion of cost savings in the motor insurance industry alone after the aforementioned reforms. Suggesting that each individual motorist would benefit to the tune of between £40 and £50 per annum there was hope that the spiralling cost of whiplash claims would now be brought under control. Can we expect any new reforms to specifically address this £1 billion in cost savings or will this figure be reduced or ignored by the authorities?
Proving Criminal Activity
At the end of the day frivolous personal injury claims placed in front of the courts do on occasion border on criminal/fraudulent activity. Unfortunately in many cases, the cost of investigating such claims does often seem to outweigh the actual benefits in the short to medium term. The legal profession, the insurance industry and the personal injury sector perhaps need to work more closely together to root out their members who push the boundaries beyond reasonable limits. As we suggested above, any future crackdown on personal injury claims abuse could unfortunately impact genuine cases while tidying up the industry in the longer term.
It is good to know that the authorities are at least looking at the issue of potentially fraudulent personal injury claims. However, suggesting changes and not following through with their threats not only causes confusion and mayhem across associated sectors but also reduces the impact of future threats.
Conclusion
There is no doubt that the UK Ministry of Justice appears to have lost its way at least in the short term. Under the previous Chancellor of the Exchequer, many changes were confirmed and far-reaching reforms were expected prior to the recent announcement. It is tricky finding a balance between addressing potentially fraudulent activity, spiralling legal costs and frivolous claims while also protecting those with valid claims.
At this point in time we can only assume that the authorities have detailed plans for further changes to the personal injury claims sector which will address all concerns and issues. Unfortunately, the recent announcement that previous reforms are to be cancelled did not give any timescale for future announcements or indeed any details of potential future changes. Where is the guidance from the authorities when we need it?
