Legal Business Blogs

‘A severe blow to the claimant market’: Ministry of Justice revisits plans to reform whiplash cases

A month after putting the brakes on reforms to personal injury claims relating to whiplash, the Ministry of Justice has re-launched a consultation on this contentious area.

The department said in a statement today (17 November) it plans to scrap the right to compensation or put a cap on the amount people can claim for minor whiplash injuries. Capping compensation would see the average pay-out cut from £1,850 to a maximum amount of £425.

It also said it would raise the limit for cases in the small claims court for all personal injury claims from £1,000 to £5,000, suggesting claims management companies and paid McKenzie Friends could help instead.

Kennedys partner and motor insurance specialist Ian Davies said: ‘The news to proceed with the reforms to crackdown on whiplash claims will come as a significant boost to many insurers and a severe blow to many in the claimant market, who were no more than a month ago celebrating the reforms being seemingly shelved.

‘The short consultation period will place pressure on all concerned to evaluate the proposed measures and consider the impacts to their particular book of business.’

Davies added that the boundaries of the consultation appear to go further than previously proposed, which will generate a forceful response from all interested parties. ‘In particular, we anticipate an outcry from those who deal with injury claims outside of the whiplash space who will be affected by the proposal to increase the small claims limit for all personal injury claims,’ he said.

Clyde & Co head of motor volume Mark Hemsted told Legal Business the thrust of the reforms will lead to lower cost claims and as a consequence fewer claims, however lawyers were still appraising the effects of the consultation.

On the small claims court limit, Hemsted (pictured) added: ‘The question is can claimant solicitors survive when fees go down significantly – or will someone else step into that space. This document will concern firms such as Slater and Gordon, although in a separate consultation in 2013 the government indicated it would be wrong to leave claimants unrepresented.’

The reforms, which were originally announced by the then Chancellor during last year’s Autumn statement, were billed as controversial as they sought to end the compensation culture in the UK, but were seen by some as an all-out attack on victims for the benefit of the insurance industry.

The day after the reforms were announced, Australian-listed Slater and Gordon, which makes 80% of its UK revenue from personal injury claims, saw its share value halve.