Tuesday 24th April, 2012 - ‘Do Insurers want to ban whiplash?’
Introduction
Good morning and thank you for inviting me to be with you at the International Whiplash Conference here in Bristol today.
There is a comprehensive agenda lined up over the next three days and an enormous amount of collective international expertise to learn from on the issues associated with whiplash.
And we in the UK need to draw from all of your experiences. We have much to learn from looking at how other countries have attempted to tackle the issue of whiplash. From preventing whiplash occurring, to treating it effectively when it does to understanding the role that the compensation system plays in promoting whiplash as a condition. We need to learn not just from our Continental neighbours. We need to look further afield as well.
Today I have been given the title, ‘do insurers want to ban whiplash?’
Frankly, that is not the right question. Insurers can’t ban whiplash any more than they can ban any other condition. The simplicity of the question betrays the complexity of the issues underpinning it.
The key question to consider is whether whiplash should be compensatable. So in order to provide an answer my remarks this morning will cover three areas:
- The nature of the problem;
- How insurers are tackling it;
- And finally, some of the solutions Government and society should be considering.
Background
But first, and in particular for the benefit of our international guests, some background on whiplash as a condition in the UK.
Britain seems to be in midst of a whiplash epidemic. Last year, 570,000 people claimed to have suffered a whiplash injury. To put that into perspective, that is one person claiming whiplash every minute of every hour of every day. And when you put that into an international context, Britons have the weakest necks in Europe.
Those 570,000 whiplash claimants would fill London’s Olympic stadium seven times over. It is also more than the entire population of Bristol making a claim each year.
I do not believe for one moment that all of these claims are genuine, not least because they are so out of kilter with historical claims levels in this country. Part of the problem is that the whiplash compensation system in the UK is completely dysfunctional. The system is riddled with ambulance chasing claims management companies and claimant lawyers. So it will come as no surprise to you that fraudulent and exaggerated whiplash claims are an ever-present and increasing problem.
In the last three years, claims for whiplash have risen by a third while car accidents notified to the police have decreased by 16%. How can it be that while the number of accidents is going down, claims for whiplash are rocketing, especially when, as we heard from Thatcham this morning, cars are getting ever safer?
Given that most whiplash claims result from car crashes, it is the vast majority of honest customers of the insurance industry who are paying the bill. And that bill is huge. Last year, whiplash cost Britain’s car insurers over £2 billion representing a fifth of all motor claims. And the unfortunate reality is, of course, that those costs must be passed on to honest, law-abiding motorists through increased car insurance premiums.
So how much are we talking about?
Whiplash adds £90 to the average car insurance premium.
That £90 represents 20% of the average car insurance premium of £440.
That £90 is more than the cost to honest motorists of fraud and uninsured driving combined.
And that £90 is coming out of the pockets of honest motorists at a time when many can least afford it.
In a highly competitive and price sensitive market, this is a substantial cost for motorists to bear.
Therefore, addressing the spiralling cost of whiplash claims is something the insurance industry is determined to achieve.
But so is the Government. In February the Prime Minister hosted an Insurance Summit at Downing Street where the industry and Government agreed to work together to put a brake on the whiplash epidemic.
Justine Greening, the Transport Secretary, is taking forward work in a number of areas and the industry is actively engaging with her as she does. She recognises that honest and hard-working motorists are paying higher insurance premiums than they need to in order to line the pockets of those unscrupulous enough to make bogus whiplash claims. And those that help them do so.
The car insurance market in the UK is one of the most competitive markets in the world. Any savings that insurers make from reducing the number and cost of whiplash claims will be passed on to consumers through lower car insurance premiums. But the insurance industry cannot solve the problems associated with whiplash alone. Government help is required. And that’s why by working together, Government and the insurance industry are determined to address these problems once and for all.
The nature of the problem
So what are these problems?
Firstly, the term “whiplash” is itself problematic given that whiplash is no different from any other type of neck pain. A soft tissue neck sprain which occurs in a car crash is clinically indistinguishable from any other sources of neck pain. As such, some people with existing neck complaints can make a claim and be diagnosed with whiplash and insurers will have to cover the costs of the dishonest claim. Whiplash is so engrained in society’s psyche that the words “sore neck” followed by “car accident” almost always leads to a clinical diagnosis of whiplash.
Secondly, the UK’s compensation system is, as I have already mentioned, a key factor leading to increased claims for whiplash. The system is too convoluted, too complex and too costly. The UK’s compensation culture has been fuelled by claims management companies and claimant lawyers encouraging people to make frivolous claims for whiplash.
When a claimant files a personal injury claim with an exaggerated or fraudulent element, case law has allowed the genuine part of the claim to receive compensation. This simply encourages people to inflate the extent of their claim. If they don’t get caught, they get a windfall gain. And if they are caught, they get compensated for the genuine component of their claim anyway. So, where is the disincentive on a claimant not to exaggerate their claim?
Finally, there is no robust and objective test to diagnose whether someone has whiplash. Whiplash is no different from a headache or backache: the symptoms are self-reported by the claimant with no physical evidence of injury. Insurers cannot prove a claimant does not have whiplash any more than a claimant can prove that they do. And relying on the word of a claimant when there are substantial sums of compensation at stake is no longer good enough.
All these elements have combined to make whiplash the ‘fraud of choice’ for too many dishonest motorists.
What insurers are doing to help tackle the problem?
Given the complexity of the problem, there is no silver bullet offering an easy solution.
But insurers are working hard to address the problems on a number of fronts.
Technology
We heard earlier from Matthew Avery of Thatcham on how whiplash injuries occur. And we will be hearing tomorrow from Andrew Miller about the engineering solutions that have the potential to address the problem.
The design of car seats and effective head restraints are critical in ensuring that drivers and passengers are better protected in the event of a collision.
When a collision happens, insurers need to understand the likelihood of a whiplash injury occurring. So Thatcham and insurers have been working with our counterparts in Germany and Austria to develop a software tool called WITkit. This uses bio-mechanical evidence to predict the probability of a whiplash injury and this can form an important element of an insurer’s claims management process. Factors such as the damage to the vehicles, size and
type of the vehicle involved and where the passenger was sitting are all important components.
But if there hasn’t been a collision, there can’t possibly be a whiplash injury. So, even better, is to stop the collision occurring in the first place. That is why Thatcham have been working with vehicle manufacturers to develop and incentivise the use of anti-collision technology in new vehicles. Insurers are considering how we can further incentivise this work - rewarding vehicle manufacturers by making insurance for cars with this technology installed cheaper.
Finally, a number of insurers are introducing telematics-based insurance products. These ‘black box’ data recorders will enable insurers to determine the speed of a crash which results in a whiplash claim. Or indeed, if any collision occurred at all.
Medical guidance
On the medical part of our approach, I mentioned earlier the difficulties in diagnosing whiplash. In 2003, the ABI produced guidance to clinicians and those with whiplash about the best way to treat the condition.
Although no longer in widespread circulation, a number of insurers still use it. And we are currently exploring whether we might publish new guidance, aimed at improving doctors’ understanding of whiplash at the point of diagnosis.
Combating fraud
As the steep rise in claims suggests, insurers believe that a number of whiplash claims are at best exaggerated, and at worst fraudulent.
With no objective medical test, criminals have realised that staging accidents and making whiplash claims can be lucrative – so-called “crash for cash” scams - of which there were around 30,000 in 2010 costing insurers approximately £350 million.
To combat fraud, insurers are:
• Using the Insurance Fraud Bureau to combat organised car crime, including “crash for cash” scams;
• Improving the way we share information about drivers with others, including the Government;
• Developing the Insurance Fraud Register, a database of known fraudsters;
• Providing £9 million for a specialist insurance fraud unit at the City of London Police, but operating nationally. Since the unit opened in January, it has made 77 arrests.
Some of the solutions we should be looking at
But despite our efforts, the whiplash epidemic is only getting worse. More needs to be done. And this is where the Government’s help is so important.
It simply cannot be the case that British necks are so much weaker than those in the rest of Europe, so what kind of radical reform is needed to combat whiplash in the UK?
If we really want to tackle the problem, we need to change the law.
The Government has made a good start in this regard. The Legal Aid, Sentencing and Punishment of Offenders Bill was considered, hopefully for the final time, in the House of
Lords yesterday. Insurers have supported this legislation from the outset. Not because it is going to save the industry vast amounts of money, but because it should deliver important behavioural changes in the system. In the future, claimants will need to have some skin in the game when making a claim rather than the current situation where they have nothing to lose by filing a whiplash claim. And by banning the payment and receipt of referral fees, claimant lawyers and claims management companies will have the fat that fuels their ambulance chasing taken way.
But although important, this is only the first step of the journey. To affect meaningful change for consumers, we need to see much more radical legal reform.
Whether insurers want to ban whiplash is not the issue. Tackling the compensation paid for whiplash is what we need to address.
As the Prime Minister said after the Insurance Summit in February, “the insurance industry plays such an important role in all our lives – it is there to help when we are at our most vulnerable and at greatest need.”
The point of insurance is to pool society’s risks so that the unfortunate few can receive the help and compensation that they need.
But society needs to ask some important questions:
• Should compensation be awarded for soft tissue neck injuries following a car crash when a claimant can’t objectively prove they have an injury?
• Does the fact that compensation is paid for whiplash mean that people are financially incentivised to sustain “injuries” they might not otherwise have?
• Should honest, law abiding motorists have to pay 20% higher car insurance premiums to compensate those who game the system?
Those are important questions for society. But only society can answer them.
That is why we think it is important that the Government asks people what they think.
We have some suggested solutions the Government might consider. And although these are not formal ABI positions, they are areas that merit serious consultation and discussion. For example:
• Looking at whether whiplash should still attract general damages when there is no objective medical evidence of an injury
• Capping or reducing the level of damages awarded for whiplash claims;
• Having independent, accredited doctors examining whiplash claims. Parallels can be drawn here with the government approach to providing medical evidence for incapacity benefits. Such a system might improve not only diagnosis but prognosis where, despite research suggesting that most soft tissue neck injuries can expect to heal within three months, insurers are seeing a greater number of claimants with recovery times of up to twelve months; and
• Facilitating insurers’ use of bio-mechanical evidence to help weed out exaggerated or fraudulent whiplash claims
Again, there is much we can learn from international examples of these ideas in action. Both Germany and Austria have recognised the limitations of medical evidence in low velocity impact crashes. As such, both give greater weight to bio-mechanical evidence in determining whether compensation should be payable for a whiplash claim. Better use of
bio-mechanical evidence might enable the Government to introduce a speed threshold under which a whiplash a claimant would have a rebuttable presumption that a whiplash injury has not occurred. Elsewhere, parts of both Australia and Canada, for example, have addressed issues around what kind of injury should attract damages and at what level.
Conclusion
So there is plenty to think about. But my key message to you today is that we simply cannot go on as we are.
It is not for insurers to say whether compensating whiplash should be banned. Society needs to make that decision. And there are some important trade-offs that need to be considered.
None of this is simple. If it were, it would have been done long ago.
And as I’ve explained this is a complex area. There are no quick fixes or easy answers.
Tweaking the current system is not enough. If we are to achieve anything, we need to think big and we need to think bold.
Because the reality is that without bold action and fundamental reform, consumers will continue to pay the cost of exaggerated and fraudulent whiplash claim through inflated car insurance premiums.
The Government understands the problem and my hope is that it will set out its ideas on how to tackle the whiplash epidemic and ask the public for their views.
The insurance industry has some ideas about the issues that need to be considered. I am sure the Government does as well. And there are many people in this room and on the streets around us that will have their own ideas on how to address this societal problem.
And that is why we need a public debate. The insurance industry alone cannot solve the problems in the system any more than the Government can.
Everyone has a stake in the outcome and that is why everyone needs to work together to tackle the UK’s whiplash epidemic once and for all.
Thank you.