CHECK AGAINST DELIVERY
ABI Motor Conference - 2 December 2014
Keynote Speech by the Secretary of State for Justice 
Thank you for your kind introduction, and I would like to thank the Association of British Insurers for inviting me to address you here today. The agenda seems to be varied and engaging in nature and I hope you have had an interesting day so far.
Today, I am going to talk to you about the Government’s much needed reform programme to tackle fraudulent insurance claims and in particular, the number and cost of whiplash claims. Successfully tackling such claims – especially fraudulent and unnecessary claims that impact on the cost of motor insurance - will of course be of benefit to everyone.
You as insurers will certainly benefit through reduced costs. Claimant lawyers will benefit from being able to concentrate on helping genuinely injured claimants, and in turn, claimants will benefit from a better, more robust, system which will speed up the settling of their claims. Finally - and crucially - consumers will benefit through lower insurance premiums.
Motor insurance is an area where too many claims have, and are still, being brought inappropriately. We know that reported road traffic accidents fell from 190,000 in 2006 to 150,000 in 2012 – a reduction of over 20%. Yet at the same time, the number of personal injury claims from road traffic accidents rose from 520,000 to 820,000 - an increase of almost 60%.
These figures are a clear indication that there is a problem and that the system is crying out for reform. This is why in February 2012 at an insurance summit hosted by the Prime Minister, the Government committed to taking action to tackle this problem.
The Government accepts that many personal injury claims are genuine, but it is also clear that there are far too many speculative, exaggerated or even outright fraudulent claims being made. This must be addressed. It is not right that people who cheat the system should get away with it and force up the price of motor insurance for honest, hardworking motorists. So I make no apology for targeting the exaggerated claims of whiplash fraudsters in order to drive insurance premiums down further.
Following our commitment at the 2012 summit, this Government has implemented a number of reforms to reduce the costs of dealing with personal injury claims.
The implementation of the Jackson reforms through the Legal Aid, Sentencing and Punishment of Offenders Act on 1 April 2013 introduced major changes
These have introduced some much needed balance to the system. We have already seen an impact on the personal injury market, and premiums have fallen.
But the Government wants to go further.
Firstly, as I mentioned earlier, I would like to talk to you about the Government’s whiplash reform programme, which I know my department has been working on with you and many other representatives from across the personal injury industry.
This first tranche of reforms was delivered earlier this year. We have now reduced and fixed the cost of obtaining medical reports in whiplash claims, and medical experts can only charge £180 for an initial whiplash report. This is a cost which we believe appropriately reflects the time taken to carry out an assessment and complete a report and will avoid driving up the costs of a claim.
Other measures included introducing a clear expectation that medical evidence will be limited to a single report and we have introduced new rules to discourage defendants from settling whiplash claims without a medical report.
The Government is of the view that ‘pre-medical’ offers to settle are wrong and can result in questionable claims going unchallenged.
I see that Aviva have recently announced that they have successfully challenged over 200 claims this year, and I expect others in this industry to follow suit.
The Government has done its bit by reducing the cost of civil litigation, and it is now time for you to step up to the plate and do yours.
The other measure introduced in October stops experts who produce medical reports from also offering treatment to the injured claimant. This will ensure there is no incentive for experts to encourage or recommend unnecessary treatment. These measures will again apply much needed controls to the cost of obtaining medical evidence in whiplash claims.
However, these reforms were only the beginning.
Phase two of our whiplash reform programme concerns our commitment to improve the standards of medical evidence in whiplash claims and, in particular, to safeguard both the quality and independence of medical evidence.
Following consultation, I can now today announce that the Government has today published its response setting out our second tranche of whiplash reforms.
We are proceeding with the introduction of a new system for obtaining the initial medical report in whiplash claims. This system will introduce greater independence in the market, breaking the links between experts and solicitors and remove potential conflicts of interest from the system.
Through the use of a new independent IT portal - called MedCo – a random allocation of experts or medical reporting organisations will be available to users requiring medical reports. This will make sure that medical experts and organisations are allocated in a fair, independent and transparent way.
As well as this, the Government is also firmly committed to ensuring that all medical reports commissioned under the new process meet minimum quality standards.
For that reason, the new system will introduce an accreditation requirement for all experts wishing to continue to produce the initial medical report for whiplash claims.
It is not the Government’s intention to inhibit business. Third party organisations will not be prevented from owning medical reporting organisations, which will of course be free to compete for work on the open market.
The MedCo system will be open to all experts currently writing whiplash reports. All these experts will be invited to register with MedCo from January. They will then be given a period of time in which to gain their accreditation.
It is our intention that MedCo will go live on 1 April 2015. From that date, only those medical reports sourced via MedCo will be accepted in support of whiplash claims.
Any experts who are unable or unwilling to obtain accreditation by the deadline will have their details removed from the MedCo system, and they will only be able to re-register once they have become accredited.
If you would like further information on MedCo and how it will work, I urge you to visit the new MedCo website, which also went live today.
But our work is not stopping there. While we have made and are continuing to make significant progress in fight against unnecessary and fraudulent motor insurance claims, more still needs to be done across the sector to combat fraud.
The Government is already taking action in this area and I am pleased to confirm my support for a significant cross-industry initiative to tackle the number of fraudulent claims through the sharing of data between insurers and lawyers.
This reform will require claimant lawyers to undertake a search of a potential client’s previous claims history. And, helpfully, this data is held by you in the insurance industry!
This data is extremely useful in fraud prevention and I would like to take this opportunity to urge those insurers’ not actively contributing data to the database to do so, as this data is – and will continue to be – a significant weapon in the fight against fraud.
The Government is also taking action in the Criminal Justice and Courts Bill to tackle fraudulent insurance claims and other dysfunctional behaviours in the personal injury sector more generally.
Under the current law, the courts have discretion to dismiss a claim for fraudulent behaviour, but will only do so in very exceptional cases, and will generally still award the claimant compensation in relation to the “genuine” element of the claim.
We are strengthening the law so that dismissal of the claim in its entirety - where the court is satisfied that the claimant has been fundamentally dishonest - will become the norm in such cases.
In addition, we are putting in place a statutory ban on the offer of inducements by lawyers in personal injury cases. Examples abound of solicitors offering money or gifts such as iPads to clients for pursuing a personal injury claim.
Government measures have already removed a number of unnecessary costs from the system, and we firmly believe that this suite of further reforms will tackle fraud, drive out dysfunctional behaviours and continue to lower the costs of dealing with personal injury claims.
However, despite this, more needs to be done by the industry.
Insurance claims fraud is a huge problem for the insurance industry, and according to ABI statistics, fraud adds on average an extra £50 to every household's annual insurance bill.
As we have seen, the Government has taken big steps towards reducing bogus whiplash claims but the problem needs to be addressed more widely beyond motor insurance.
And I believe there is scope to consider a broader number of issues which contribute to claims fraud more widely. In particular, there are three main areas that I think we should address:
First, the perception among some consumers that insurance is ‘fair game’ and that making a fraudulent claim is a legitimate way to make some money.
Second, are there any practices of those involved in the claims process (including insurers, lawyers, claims management companies and other intermediaries) which fail to deter insurance claims fraud.
And third, are there aspects of the current legal framework which could be strengthened to prevent claims fraud.
I am therefore, today, pleased to announce that I, jointly with the Chancellor of the Exchequer, have invited David Hertzell to chair a taskforce to consider the issue of insurance claims fraud, looking at each of these issues.
David will invite representatives from the insurance industry and legal profession to participate in this, with a view to reporting some interim findings by March next year. I look forward to the support the industry in helping David and the taskforce achieve its aims.
These outcomes and savings will benefit the insurance sector and we fully expect the industry to continue to meet the commitment made at the Prime Minister’s summit to pass on the savings from Government reforms to customers … which I am sure you will agree would be good news for everyone here today.
As I have just outlined, it is clear that this Government is committed to driving down the cost of living for all, and indeed we are now all benefiting from a fall in the cost of insurance premiums.
The latest ABI comprehensive premium survey (October 2014) shows a 14% drop in the actual premiums paid by motorists since the start of 2012. This is a positive situation indeed, and I can assure you that we will be doing our bit to ensure that costs continue to come down.
But I expect you to continue to do your bit too and we expect premiums to come down further.
Finally, I would like to finish with a thank you. The views and opinions of those working within the personal injury industry are important to the Government, and I would like to take this opportunity to thank all who have engaged with us on the development of these reforms over the past two years.
Collaborative working with stakeholders has enabled us to move forward with these reforms quickly and constructively, to the benefit of the industry as a whole. I hope it will continue.
Now I think that this is a good point to hand over to the floor for what I hope will be a timely and informative discussion of these important reforms.