“These reforms have the potential to have a substantial impact on the UK motor insurance market. There are different scenarios to consider and a range of levels in the new tariff which means the pay-out for damages and legal fees could reduce by 19% on some claims through to as high as a 78% reduction on others.
In analysing injury claims in England and Wales that have settled in the last 24 months, that would be impacted by these reforms exactly as is intended, we estimate that it would have reduced the overall spend on whiplash-related claims for insurers from being 17.5% of their total claims spend to 10%.
If this is all passed through as a reduction in the cost of insurance, the knock-on impact to consumer premiums would in our opinion be a £25 per policy saving, resulting in a £1bn reduction in UK Motor market premium overall.
However, as we saw in the 2012 reforms (known as LASPO), making changes to the injury settlement process is complex and the outcomes do not always align with expectations. There are uncertainties on the exact proportion of claims that will fall into the new whiplash tariff and also how claimants and industry behaviours may change and impact claims frequency. The early cases arising from the 31 May 2021 onward and the new market trends that emerge will need to be closely monitored."
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