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Ministry of Justice delays to whiplash reform cost motorists nearly £3m a day

13/10/2016

Ambulance chasers ‘laughing all the way to the bank’ say ABI

The Government must press ahead with its reforms to compensation for minor whiplash injuries and not cave in to the vested interests of claimant law firms the ABI said today.

It comes almost a year after then Chancellor George Osborne promised in his Autumn Statement that the Government would consult on how to implement proposals to “crack down on the fraud and claims culture in motor insurance” and “end the cycle in which responsible motorists pay higher premiums to cover false claims by others”.

A consultation paper setting out how to implement the reforms has still not been published nearly six months after it was finalised.

James Dalton, Director of General Insurance Policy at the ABI said: 

“The Ministry of Justice seems to be rowing back from much needed reform to the civil justice system that will save motorists up to £50 a year on average. The UK has one of the most abused systems in Europe and the reforms would tackle the excesses of the compensation culture. Without action, claims management companies will continue to nuisance call and text honest motorists encouraging them to make fraudulent and exaggerated claims through claimant law firms.

“Every day of delay costs honest motorists across the UK nearly £3 million. The plans are drawn up and ready to go so there is no excuse for not pushing ahead.

“If the Ministry of Justice delivers on its promises, millions of honest customers will be better off. If they cave in to the vested interests of the ambulance chasers and cold callers, those businesses will be laughing all the way to the bank at the expense of honest motorists.”

The Government said the reforms would save £1 billion a year from premiums, which equates to the delay costing UK motorists nearly £3 million a day and £4 billion over the course of this parliament. An average motorist will be £200 worse off by the end of the Parliament if the Government does not deliver on its promise.

At the same time motor premiums are up 10% over the last year. The rising cost of personal injury claims is helping drive this, with the costs of average bodily injury claims going up by over 5% already this year to nearly £11,000. This is on top of the large increases in Insurance Premium Tax, which is gone up from 6% to 10% in less than a year.

Key facts on the Government’s planned reforms:

  • Previous reforms introduced in 2013 saw £1 billion in reduced costs passed onto customers, proving the insurance industry is true to its word when it says it will pass on savings to consumers.
  • But cold callers and claimant lawyers have combined to find new ways around the rules and the costs of personal injury claims are on the rise again.  
  • The Government’s proposals would cut out the incentives for those who want to rip off the system. 
  • Under the Government’s plans, injured people would still be compensated for their losses, such as the cost of medical treatment and loss of earnings, but  “general damages” – cash payments on top of these losses, for pain and suffering – would be limited for minor injuries.
  • The reforms will also tackle the incentives for claims farming by claimant solicitors by increasing the Small Claims Court limit, where claimant lawyer fees are not recoverable, from £1,000 to £5,000.