General Insurance Article - ABI and LMA respond to whiplash report

 The ABI is calling on the UK Government to grasp the nettle and deliver the vital reforms needed to tackle the UK’s whiplash epidemic. Only fundamental changes to the current system will mean that insurers can deliver further reductions in car insurance premiums for their customers.

 Following the publication this week of the Transport Select Committee’s report–‘Cost of Motor Insurance: Whiplash’ the ABI’s James Dalton, head of Motor Insurance said:

 “The industry remains committed to paying genuine whiplash claimants fair compensation in as short a timeframe as possible. However, for too many dishonest motorists, whiplash has become the fraud of choice, increasing motor premiums for everyone.

 “The Transport Select Committee is right to identify the need to tighten up the requirements for those submitting whiplash claims. There has been a growth in recent years in claimant lawyers and claims management companies encouraging people to submit an increasing number of frivolous or exaggerated claims. Whiplash now costs UK motorists over £2n a year, adding £90 to the average premium.

 Following recent reforms to the civil litigation system, insurers committed to pass on cost savings to motorists. We have delivered on that commitment and average premiums have reduced by 10% in the last year.

 The Committee’s report has kicked into the long grass making the tough calls for reform that are needed to help insurers combat the whiplash epidemic and deliver further premium reductions for hard-pressed motorists.”

 Despite safer roads, in 2012/13 there were just under 477,000 claims for whiplash, this equates to nearly one claim every minute.

 The UK is the whiplash capital of Europe: 78% of low value motor personal injury claims are for whiplash, compared to an average of 48% throughout the rest of Europe.

 LMA underwriting manager David Powell, who gave evidence to the Transport Select Committee, reacts to the recommendations:

 “The Committee’s decision to consult on reducing the statutory limitation period for whiplash claims is strongly supported by the LMA. We have believed for some time that limitation should be reduced to six months for whiplash and similar injuries, which would reduce the scope for fraud without affecting genuine claimants.

 We also welcome the recommendation to require claimants to provide better evidence to support their claims. The bar needs to be raised, and the existing medico-legal process leaves insurers’ exposed when trying to challenge a claim, resulting in another layer of cost. Action on this recommendation will mean improving the quality of medical reports, including a better clinical assessment of whiplash injuries and the establishment of legal facts rather than medical opinion.

 The most disappointing news is that the Committee has recommended keeping whiplash claims out of the Small Claims Track (SCT) process at this time. We understand the Committee’s concerns regarding vulnerable claimants, but the LMA does not accept the argument that it would be uneconomic for solicitors to represent claimants in the SCT, given the availability of Damages Based Agreements (DBAs). The SCT has a proven track record of successfully handling lower value claims in other areas of law.

 However, recognising the many benefits of the SCT, and given the purpose of this inquiry was to recommend ways to reduce the cost of motor insurance, the Committee has suggested that whiplash claims could be placed within the SCT provided that the Ministry of Justice addresses their concerns first. The LMA believes the SCT process, and existing FCA regulations requiring insurers to treat claimants fairly, already provide adequate safeguards to protect litigants in person, with vulnerable claimants having access to legal representation via DBAs.

 We look forward to the MoJ’s response to the Committee’s proposals and the potential appointment of a senior Minister to co-ordinate the actions to reduce the cost of motor insurance.” 

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