It is two years and one month since the coalition government decided not to raise the small claims limit for personal injury (PI) from £1,000 to £5,000.
The then justice secretary, Chris Grayling, told Parliament in October 2013 that there were ‘good arguments’ for increasing the limit ‘to raise incentives to challenge fraudulent or exaggerated insurance claims’.
However, he said he had listened to the views of the transport select committee (which opposed the move) and others that ‘now may not be the right time’ to raise the limit ‘because of the risks that it may deter access to justice for the genuinely injured and encourage the growth of those disreputable claims firms which so damage the industry’.
He continued: ‘At this stage, we have decided to defer any increase to the small claims threshold until we can determine the impact of our wider reforms on motor insurance premiums and better safeguard against the risks identified above. We believe that this is the right thing to do for all interests.’
Some saw this as kicking the issue into the long grass, but the Ministry of Justice insisted that it really was keeping a watching brief and would return to the proposal.
So it has proven, but has anything really changed in that time? Insurance premiums that had fallen in the wake of LASPO (Legal Aid, Sentencing and Punishment of Offender Act) have gone back up again, as has the volume of complaints by insurance companies about fraud and the so-called compensation culture.
Of course there is insurance fraud, but there has been little by way of compelling evidence to prove that it is of such a massive scale (in the overall scheme of whiplash claims) to justify capsizing the system so dramatically.
Further, changes introduced in the Criminal Justice & Courts Act 2015 aimed to penalise fraudulent and exaggerated claims anyway, but – as has been the way in PI in recent years – have not been given time to have an impact before another wave of reform washes over the sector.
Surely the bigger shock in the Autumn Statement, though, was an end to general damages for ‘minor whiplash injuries’, however that is to be defined. This came out of the blue. Putting aside the questionable principle of making a tort non-actionable, removing the ability to claim for pain and suffering is surely likely to discourage many people with otherwise only small special damages claims from taking action in the first place.
This will only embolden insurers to ramp up third-party capture (ie, trying to settle a claim before the victim has spoken to a lawyer) at a time when the government says it wants the practice to stop. Given the choice of having to take your own case before the small claims court or accept some sort of payout there and then, it is not hard to guess what many people would do.
In this era of de-lawyerisation, I continue to wonder whether it would have been better to follow the lead of the Republic of Ireland, which set up the Personal Injuries Assessment Board to handle low-value PI claims on a tariff basis without the need for lawyers. At least that would not leave claimants at the mercy of insurance companies which owe them no duties.
There remain options for lawyers. A damages-based agreement or plain fixed fee might still be viable – those firms which do not routinely charge clients success fees are already operating on base costs of just £500 per case – especially for cases at the higher end of the new small claims limit.
Given that the new limit will be for all personal injury cases, and not just whiplash, many firms will surely have to consider this.
Then again, a lot of firms do routinely charge the maximum success fee of 25% of damages, an approach deprecated by a regional costs judge recently. This makes their calculations much harder.
Either way, an inevitable result is going to be greater use of technology and low-level staff to handle claims to make them viable; the need for scale to make this work will presumably mean even more consolidation, along with redundancies and closures at other firms. And that claims management companies that currently pester the nation to handle PI claims on their behalf will move into the field.
Putting this reform together with another announcement yesterday, might this be the perfect time for the proposals for an online court for low-value cases to get off the ground, making it easier for people to bring action themselves? We are now waiting to hear whether the money committed yesterday to the digitisation of the courts will include piloting the HM Online Court proposed by the Civil Justice Council earlier this year, but I would bet it does.
The smart firms have been moving away from low-value road traffic accidents anyway – as have the savvy marketing collectives like National Accident Helpline and First4Lawyers, which have diversified away from PI – but it is inevitable that others will look to follow suit, even if they do not really have the ability or skills to handle other types of PI, with all the negative consequences that could have.
It seems to be an ever-downward spiral for PI lawyers, and let’s not forget that defendant firms will be hit by a reduction in the number of claims too.
More than a decade ago, Norwich Union (as it then was) suggested that claimants whose damages claim was for less than £1,000 should be happy with an apology “or other show of regret”, such as flowers. It was ridiculed then, but in the future, claimants may consider themselves lucky to get even that.