3 August 2017

1. True Solicitors act for claimants who have been injured on the road, at work, or who have suffered injury as a result of clinical negligence. We employ 170 people across two offices; Newcastle and Birmingham.

The prevalence of RTA-related whiplash claims

2. The Government blames the prevalence of RTA-related whiplash claims on a combination of fraud, cold calling and targeted advertising, but in doing so completely overlooks the fact that 70% of claims are presented by insurer connected law firms.

3. Insurers recognised they could increase profits by acting for injured claimants under their own Before the Event (BTE) legal expense insurance policies, and so with the advent of Alternative Business Structures (ABSs) in 2012, insurers quickly acquired law firms. As a consequence the personal injury sector is now dominated by insurer-owned law firms such as DLG Legal Services (a subsidiary of Direct Line Group), Admiral Law, Minster law (a subsidiary of BGL Group), Ageas Law, Co-operative Legal Services and RSA Law. Other insurers, such as LV, have formed joint ventures with law firms so they can profit from acting for injured claimants.

4. The number of injury claims being presented by insurer-connected law firms (or panel law firms) is huge. It states at paragraph 7.56 of the Whiplash Impact Assessment that ‘70% of claimants currently have BTE funded legal representation[1]’. The MoJ’s impact assessment fails to address this issue because it believes the problem is not with these law firms because they ‘are favoured by defendants (insurers), as those who will not unduly inflate claims’[2].

5. So, according to the insurance industry, the prevalence of whiplash claims has nothing to do with the 70% of claims that are controlled by the insurance industry, but everything to do with the 30% that are not!

6. Pre-medical offers also contribute significantly to the volume of RTA whiplash claims. The impact assessment states there are 70,000 pre-medical offers[3], but this was based on ‘anecdotal evidence’ from the Association of Medical Reporting Organisations (AMRO) and did not take into account offers make by insurers direct. The Chairman of AMRO, Bippon Vinayak, has since confirmed that the 70,000 figure “does not take into account cases settled directly by insurers as we would have no knowledge of this.[4]”

7. According to the impact assessment ‘80% of pre-medical claims currently have no legal representation’6 and, whilst this seems high, it must be understood that insurers operate substantial third party capture departments whose purpose is to settle third party injury claims direct without the involvement of a lawyer.

8. It is our view the number of pre-medical offers made by insurers is in excess of 150,000 and the evidence for this comes from the Compensation Recovery Unit (CRU). For the year 2015/2016 the CRU records 555,841 RTA settlements with 139,176 claimants (25%) recorded as not having legal representation (see table).

CRU Data

9. The Committee should be suspicious of an industry that prides itself of the quality of its data but now admits it does ‘not record details of Pre-medical offers’[1].

10. The Committee should be suspicious of an industry that prides itself of the quality of its data but now admits it does ‘not record details of Pre-medical offers’[5].

Tariff to regulate damages for RTA-related whiplash claims 

11. We do not agree that a fixed sum tariff should be introduced to cover minor injury claims because no two cases are the same.

12. General damages are awarded for pain, suffering and loss of amenity and so the amount of compensation varies depending on the type and severity of the injury, the injury duration, and the effect the injury had on the claimant’s life, such as their ability to work, care for children, enjoy hobbies, play sport, perform household chores, socialise etc.

13. Some people are fit and healthy and recover quickly, but others can take longer to recover because they are old, or frail, or have pre-existing conditions and ailments. There is no one-size fits all solution.

14. As for the tariff, the proposed figures are derisory and unfair, and this can be demonstrated by examining past reported cases and seeing what the outcome would be following implementation of the reforms. Take for example the Matthews v Langley (2015) case[6].

15. Vicky Matthews was a 38-year old nursery nurse who suffered soft tissue injuries to her neck, shoulders, lower back and chest, whilst travelling as a passenger. Vicky received treatment at the scene and was taken by ambulance to hospital where she received further treatment. Her injuries restricted her ability to lift which meant she could not work and it made it difficult for her to sleep. She attended her GP twice, was prescribed pain killers, and also underwent 9 sessions of physiotherapy. She experienced ongoing pain and restricted movement in her neck, shoulders and back from which she was expected to fully recover by 5 to 7 months.

16. Vicky had legal representation which meant she was able to pursue her claim to court where she was awarded £2,250 injury compensation.

17. Under the Government’s proposals Vicky would get £450 on the basis her injury settled under 7 months, however from this she would have to pay legal costs. As Vicky was a passenger it is not clear whether she would have legal expenses insurance. If not, then she would be left pursuing her claim either as a litigant in person or represented by a Claims Management Company (CMC) who would charge a success fee (typically 25% to 39%[7]). The outcome for Vicky is that she would be left with compensation of £275 to £340.

The 20% Discretionary Uplift in Exceptional Circumstances

18. This provision, whilst well meaning, is utterly pointless.

19. In order to obtain the ‘discretionary uplift’ the solicitor would be required to issue court proceedings supported by a witness statement explaining why the ‘discretionary uplift’ should be applied. The legal work, including representation at the court hearing, would cost at least £200 plus VAT. The court issue fee for a small claim under £300 (assuming it was only the discretionally uplift in dispute) would be £35 and the hearing fee would £25. Given the average damages for an injury lasting under 24 months would be around £1000 (based on figures from the Impact Assessment [8] which shows the proportion of claims that settle within each injury bracket), who would risk incurring costs of at least £300 to persuade a judge to award them £200.00?

20. The Government will say these cases are ‘straightforward enough to be brought without the need for legal representation’, but does it really believe that a litigant in person, having been told by an insurer that they are entitled to £450 for a 6 month injury, would also be told about a ‘discretionary uplift’. And, even if they were, would they be prepared to draft and commence court proceedings, pay an issue fee and hearing fee amounting to £60, and attend court to argue against a barrister appointed by the insurer that their case was exceptional such that the court should award them an additional 20%. Not a chance.

Banning the settlement of claims without medical evidence.

21. Whilst we support a ban on pre-medical offers, we believe it would be impossible to enforce because insurers, knowing they cannot make a pre-medical offer for injuries, will simply offer the claimant an arbitrary amount of money, most likely described as being towards the cost of ’treatment’, which the claimant will accept in full and final settlement.

22. Therefore if a ban is not to be implemented, we make two proposals; that pre-medical offers to unrepresented claimants should never be in full and final settlement, and that insurers must disclose to the CRU every settlement they make with an unrepresented claimant specifying whether it was made without medical evidence.

The Impact of raising the small claims limit to £5,000 for RTA-related whiplash claims

23. Raising the small claims limit to £5,000 and implementing the proposed tariff scheme, will have the following consequences.

24. It removes access to justice for the majority of injury victims. The reality of increasing the small claims limit to £5000 is that it impacts on almost every claimant who has suffered an injury because it is impossible to advise an injured claimant whether the value of their injury claim exceeds £5000 without medical evidence. Only claimants with legal expenses insurance, or those with a clearly serious injury, would get help from a lawyer in the early stages of their claim. The rest would be left to fend for themselves.

25. If the claim is valued at less than £5000 the only costs a solicitor can recover are those that can be deducted from the claimant’s damages, which is limited under the CFA regulations to 25% including VAT. Going forward, based on the suggested tariffs, costs on some cases will be limited to £62.50 including VAT, which is not enough to pay for legal representation on a no-win, no-fee basis.

26. Children and clients under a disability will not get legal representation. The Impact Assessment acknowledges that raising the small claims limit could ‘adversely impact children[9]’ because injury claims involving children ‘must be settled via the court’ and the legal cost of doing so will no longer be recoverable. The Government assumes that the cost of court proceedings will be deducted from the claimant’s damages but, as we stated earlier, the 25% success fee does not provide enough remuneration to cover this cost.

27. It will increase the number of litigants in person which in turn will create huge difficulties for insurers who are now entirely reliant on claims being submitted to them though the RTA claims portal. It will also put huge pressure on the already overstretched Civil Court System. Litigants in person need assistance with: applying the law to their case, obtaining expert evidence, completing court forms, filing and serving documents, paying court fees, complying with court directions, negotiating, and representing themselves in court

28. The Government’s contention that ‘most minor PI cases are straightforward enough to be brought without the need for legal representation’ is undermined by evidence from Caseman (the County Court case management system) which shows ‘96% of PI claims in the SCT have legal representation[10]’.

29. The Government strives to underplay the effect of the reforms on access to justice by suggesting that claimants with BTE insurance will still have legal representation, however this ignores the fact that the take-up of BTE insurance will fall dramatically as a consequence of the FCA’s ban on opt-out selling which came into force in April 16 and the increase in the cost of BTE insurance as a consequence of these reforms[11].

30. It seems the Government is so fixated on increasing the small claims limit just because it has not changed for 25 years, that it has not explored whether its objectives could be achieved without destroying the efficiencies and cost savings that have been achieved through the implementation of the RTA and EL/PL Claims Portals and the associated protocols, and without removing access to justice for those that cannot afford a solicitor or do not have legal expenses insurance.

31. The rules and regulations governing the conduct of personal injury litigation and the amount of legal costs that are recoverable have changed beyond recognition from what they were 25 years ago, and so it is irrational to suggest the whole system needs to be changed solely because a small part of it has not changed for 25 years.

32. When the small claims limit was set at £1000 solicitors were paid an hourly rate for the work they did, and this continued though the introduction of Conditional Fee Agreements in 1995, and the recoverability of success fees and ATE premiums in 2000. In October 2003 Predictable Costs were introduced and this was the first of many subsequent reforms that reduced legal costs.

33. The RTA portal was introduced in 2010 together with fixed portal costs of £1200. In 2013 the Jackson Reforms extended the RTA portal to all claims up to £25,000 and reduced portal costs for cases up to £10,000 to £500. At the same time the LASPO reforms abolished the recoverability of success fees and ATE premiums and introduced fixed recoverable costs for non-portal cases.

34. When Professors Fenn and Rickman were instructed by the Civil Justice Council in 2002 to carry out research into the legal costs of pursuing low value RTA claims, they found, based on a dataset of almost 40,000[12] cases provided by defendant insurers, that the average base costs for non litigated cases in 1999 was £1600[13] (almost £2600 in today’s money). Today the average base costs for portal cases up to £10,000 is £550.00 – 79% less than what it was in 1999!

35. Legal costs for injury claims that settle in the RTA portal claims are lower now than they were 25 years ago, and costs for cases outside the portal are fixed and proportionate, so why increase the small claims limit when doing so has serious consequences.

36. We do not accept that the current system needs to change but if the Government is determined to press ahead, then we would suggest the same savings could be achieved by simply reducing the amount of legal costs payable for those cases under £5000 that are simple and straightforward and settle in the portal.

37. Where the case does not settle at Stage 2, which is an indication the claim is more complicated, the existing cost rules should apply.

38. This proposal has many advantages:-

o It keeps costs proportionate to the amount of money involved and the complexity of the case.
o It encourages good behaviour by reducing significantly the legal costs payable by insurers where they admit liability early and make reasonable offers.
o Legal costs are retained for cases that require litigation.
o The RTA & EL/PL Portal, which are effective and efficient systems for handing volume claims, will continued to be used to process injury claims.
o Injured children and vulnerable claimants will get legal representation.
o The number litigants in person will not increase.
o Solicitors, rather than CMC’s, will continue to act as ‘gatekeepers’ of the personal injury claims process.
o We also support the Alternative Claims Framework[14] proposal put forward by the Access to Justice (a2J) group. This proposal would also achieve the Governments aims without dismantling the existing claims process.

Do fraudulent whiplash claims represent a significant problem and, if so, whether the proposed reforms would tackle this effectively

39. Fraudulent motor claims are a problem but they are nowhere near as widespread as the insurance industry has led the Government to believe. According to the Association of British Insurers (ABI) there were 59,900 “dishonest” motor insurance claims in 2013[15], with a value of £811 million, however this evidence was criticized by the Transport Select Committee because it was not “clear from published material how the ABI has arrived at these figures or what counts as “dishonest”.[16]

40. On the ABI’s website it states insurers are encouraged to report cases of “clear detected fraud”, however in an explanatory note[17] to its members it also encourages insurers to report cases where a claimant has withdrawn a claim, or accepts a reduced settlement, or fails to provide documentation.

41. The ABI must know the number of cases where “clear detected fraud” exists but chooses not to release this information because, we suspect, the relatively few cases of detected fraud, evidenced by the scarcity of arrests and convictions[18], would undermine the one of the key justifications for the reforms.

The role of Claims Management Companies.

42. The proposed reforms will increase the prevalence of whiplash claims and, as a consequence, the number of fraudulent claims because CMCs, who are largely unregulated, will move into this market offering representation for a larger share of the claimant’s damages (typically 25% to 39%[19]).

43. Solicitors act as the “gatekeepers” of the personal injury claims process, rejecting thousands of claims for a variety of different reasons e.g. liability is poor, the injury is minor, the claim is statute barred, the claim is spurious etc. Some claims are rejected because the claimant, having been told about the consequences of making a dishonest claim, decides not to pursue a claim. If solicitors are removed from the process, CMCs will submit these claims and swamp insurers with cases that should never have been brought.

44. Evidence from the Claims Management Regulator suggests this behaviour is rife with 23% of regulated CMCs faced regulatory sanction by the Claims Management Regulator in 2014/15[20]. Furthermore, the Insurance Fraud Bureau reported that in the 18 months to July 2015 it had received more than 400 intelligence reports about suspected CMC fraud[21], that more than half of its live investigations featured a CMC, and that this included 56 separate CMCs under investigation for involvement in ‘crash for cash’ scams[22]. Add to that the result of an ABI survey which showed that 83% of people had received unwanted cold calls or texts from CMCs[23].

[1] Para 7.56 on page 94 of the Impact Assessment

[2] Para 1.26 on page 13 of the Impact Assessment

[3] Box 1 on page 39 of the Impact Assessment

[4]http://true.co.uk/wp-content/uploads/2017/03/Email-from-Chairman-of-AMRO.docx

[5] Paragraph 7.7, page 87 of the Impact Assessment

[6] https://zenithpi.wordpress.com/2016/04/05/whiplash-soft-tissue-quantum-update/

[7] http://www.legalombudsman.org.uk/wp-content/uploads/2014/09/Top-tips-instructing-a-claims-management-company.pdf

[8]Figures from table on page  90 of Impact Assessment

[9]Paragraph 5.8, page 84 of the Impact Assessment

[10]Box 5, page 39 of the Impact Assessment

[11]Paragraph 2.141, page 45 of the Impact Assessment

[12]Based on 27,378 RTA cases from Defendant insurer A and 11,420 RTA cases from Defendant insurer B where the claim settled for less than £15,000.

[13]Page 9, The Costs of Low Value RTA Claims 1997-2002 (January 31, 2003) by Paul Fenn and Neil Rickman

[14]http://accesstojusticeactiongroup.co.uk/acf/

[15] https://www.abi.org.uk/News/News-releases/2014/05/Insurance-cheats-feel-the-heat-value-of-fraudulent-claims-uncovered-by-insurers-hits-record-level

[16]http://www.publications.parliament.uk/pa/cm201415/cmselect/cmtran/285/285.pdf

[17]https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2014/Fraud/ABI%20fraud%20data%20explanatory%20note.pdf

[18]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/494105/PU1817_Insurance_Fraud_Taskforce.pdf

[19]http://www.legalombudsman.org.uk/wp-content/uploads/2014/09/Top-tips-instructing-a-claims-management-company.pdf

[20]http://qna.files.parliament.uk/qna-attachments/521021%5Coriginal%5CCMR_Annual_Report_2015_WEB__final_.pdf.

[21]https://www.insurancefraudbureau.org/media-centre/news/2015/ifb-welcomes-review-of-regulation-of-claims-management-companies-cmcs/

[22]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/494105/PU1817_Insurance_Fraud_Taskforce.pdf

[23]https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2015/Public%20affairs/ABI%20Briefing%20Personal%20Injury%20Fraud.pdf