It has been just over one year since the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) 2012 came into force. LASPO introduced the biggest shake-up of the civil litigation since Woolf’s reforms in the 1990s. The changes introduced by LASPO were designed to make the UK’s civil litigation system more efficient, more effective and make the costs in the system more proportionate.
One year on, and after being likened to a Bond villain by one journalist, I felt obliged to step up to the challenge; so From Dalton With Love, here are my five reflections on where we’ve come from and where we are going in relation to whiplash reform.
1. (Genuine) Claimants are Forever – LASPO hasn’t led to a collapse in access to justice. We heard it all last year and continue to hear the same tired old arguments from claimant lawyers today: that access to justice will be impeded. I say tired old arguments because they just don’t stack up against what we’re seeing in practice. At the same time as we see both domestic and foreign capital being used to buy up claimant law firms – something which wouldn’t be happening if investors didn’t think there was money to be made – we have seen no meaningful reduction in claims frequency. Both these facts show that claimants are still able to make their claim for compensation..
2. The Sky Has Fallen on Premiums - Insurers have delivered on their commitment to pass on saving to consumers. LASPO came into force and fixed recoverable costs for low value RTA claims were reduced, at the same time as the Judicial College Guidelines and the Simmons v Castle decision led to general damages awards increasing by around 20%. But premiums have fallen. Since February 2012, the ABI premium tracker shows that the average motor insurance premium has fallen by 14%. And if you don’t believe the ABI’s numbers, look at the Confused.com/Towers Watson tracker or the AA premium index. Premiums are down. And this at a time when the motor market is still not making an underwriting profit according to the independent analysis conducted by the Office of Fair Trading and the Competition Commission which found that the combined operating ratio of the ten largest motor insurers was 112%.
3. The Man with the Golden Code - Insurers are seeking to deliver good consumer outcomes in the new legal environment. By way of follow-up to the campaign we ran to ban referral fees as LASPO wound its way through Parliament, in February we launched a new industry Code of Practice - a proactive, consumer-centric step. And unfortunately, this consumer perspective is still sadly lacking from many claimant lawyers who make no attempt to self-regulate and think that it is enough to simply make noises about standing up for the injured claimant without ever mentioning just how much money they make from doing so. This is no longer good enough. Lawyers' bloated fees are paid for by insurance premium payers - whether small high-street businesses already struggling or hard-pressed consumers paying for their car insurance premiums. It’s high time we saw something concrete from claimant lawyers that put some disciplines on their own profession rather than waiting for the Solicitors Regulation Authority to act. Although there is good co-operation on some issues – sharing fraud data, for example – the rhetoric and action remains disappointing.
4. A View to Reform: Things continue to move slowly in the right direction to crack down on whiplash claims. The Ministry of Justice is currently consulting on fixing fees for medical reports in whiplash claims, discouraging pre-med settlements and introducing independence into the medico-legal reporting framework. There is further work to do over the coming months to develop an accreditation framework for those preparing medical reports and ensuring that the appropriate peer review and sanctions are introduced to weed out those who are not playing by the rules. Meanwhile, the Transport Select Committee is currently considering the issue of the increasing prevalence of psychological injuries resulting from RTAs. All represent potential wins in getting a medico-legal reporting framework that is fit for purpose and discourages “have a go” whiplash claimants, so the Government needs to make sure all these reforms are delivered.
5. £1,000 is Not Enough - The small claims track (SCT) limit needs to increase to at least £5000. The glaring omission from the Government’s current programme of reform is increasing the SCT limit. The current £1,000 limit was set in 1991 when 50% of personal injury claims fell within the claims limit. Now only 9% do. The Government recognised the strong arguments supporting an increased limit after it consulted last year. And now is the time to act. Although consumers have enjoyed reduced car insurance premiums since early February 2012, most commentators recognise that the market cycle is on the verge of turning. The Government needs to act now if consumers are to continue to enjoy falling premiums. The ball is in its court.
James Dalton is Assistant Director, Head of Motor and Liability, Association of British Insurers.