In November of last year, Chancellor George Osborne announced in his spending review that the Conservative Government plans to increase the personal injury small claims limit from £1,000 to £5,000. This is in conjunction with a ban on compensation (damages) for ‘minor’ whiplash injuries. It is likely that these significant changes will come into action in April 2017, subject of course to parliamentary scrutiny.
The government recently declared that they plan to consult on the finer detail of the small claims limit rise early in the New Year. This consultation will also include debate on whether to remove general damages for ‘minor’ whiplash claims altogether. In the wake of this announcement, an online petition was launched to campaign against the proposed reforms, which to date has received over 21,000 signatures. In an official response to this petition, the government reiterated that the proposed reforms are both ‘justifiable and proportionate’.
It has been debated previously that an increase in the small claims limit is desperately required, in order to perturb individuals from bringing false or unnecessary whiplash claims. One example to illustrate this need for change comes from the latest statistics on the number of reported road traffic accidents. These statistics outline that the number of road traffic accidents has fallen from around 190,000 in 2006 to 146,000 in 2014, while the number of RTA injury claims has risen from 520,000 in 2006/07 to 760,000 in 2014/15. This is a staggering increase in such a short space of time. While then there appears to be significant change around the corner for the personal injury sector, what impacts are these reforms likely to have on you and your insurers?
Firstly then, if you suffer a ‘minor’ whiplash injury post April 2017, you will no longer be entitled to be compensated to the same extent, as you will not be eligible for what is known as general damages (damages that aim to compensate you for the pain and suffering you incurred as a result of the accident). You will however still be entitled to recover specific losses (losses which are accrued through medical expenses, property damage and any loss of earnings that you might have suffered as a result of the accident).
The biggest change post April 2017 to effect Claimants however, is that if your claim now falls under the £5,000 limit, and you duly instruct a Solicitor to advise and act on your behalf, you will no longer be able to recoup the cost of your Solicitors fees from the Defendant insurer. Solicitors are therefore going to be forced to recover their costs from the compensation you are awarded on conclusion of your claim. It is very likely therefore that many people will chose to pursue the claim under their own accord, which could mean that vast numbers of people will be up against Defendant insurers on their own, using the small-claims process. A significant problem with this however, is that people raising personal injury claims will have little or no previous experience of raising such a claim. They are therefore unlikely to have any idea as to what their claim is actually worth, in conjunction with what they are actually entitled to recover.
Going forward therefore, individuals may not receive as much compensation as they do presently. In addition to the above, if no appropriate settlement with the Defendant insurer can be reached and proceedings need to be issued, under the proposed reforms you will still be required to follow the current court procedure. This will require you to file particulars of claim, a claim form, file directions and comply with court orders. These are complex documents and procedures that most will have little or no knowledge of. It is undeniably true that the small claims track is specifically designed to be used without the aid of a Solicitor. However, submitting a claim through the Ministry of Justice portal will inevitably remain a struggle for the vast majority of claimants. It stands to reason therefore, that whilst a Solicitor will unfortunately be forced to recover their fees from the compensation you are awarded, the overall pot of compensation you will receive is still likely to be significantly greater if you have appropriate legal representation than if you do not. A Solicitor can ensure that you are properly advised as to the amount of damages you are entitled to, to guarantee that you are not sold short by Defendant insurers.
Furthermore, a Solicitor can ensure that all required procedures are adhered to, helping to mitigate the stress that raising such a claim under your own may generate.
Whatever way you want to look at the government’s proposals for change, insurers are undoubtedly the winners. Not only will Defendant insurers no longer have to pay out general damages for ‘minor’ whiplash claims, they also look set to no longer have to pay the costs of a Solicitor, as these fees will now be recoverable from the Claimant’s damages on conclusion, as detailed above. The proposed reforms are therefore undeniably a win-win for insurers. The government have defended the proposed reforms, by stating that they expect insurers to pass savings of £40-£50 per average motor insurance policy on to consumers.
Two companies have already said publicly that they will pass all savings made back onto consumers. Whilst many people will undoubtedly be pleased to see a significant reduction in their annual motor insurance policy post April 2017, this financial saving comes at a significant expense to the 100,000’s of claimants that suffer a minor whiplash injury each year. In addition, many professionals have their doubts as to whether consumers will in fact receive any financial savings at all. Let’s not forget that prior to the Jackson reforms in 2013, insurers promised that significant savings would be passed onto consumers, but these failed to materialise in practice. Hopefully there will be no false promises a second time around… We cannot help but feel therefore that the governments proposed reforms are a little too drastic and cut throat.
Professionals from across the personal injury sector have put forward that the governments proposed changes only serve to further isolate and restrict an individual’s access to justice. This is a serious issue, which we can only hope will be raised as a topic of serious debate in the government’s New Year consultation. Whilst the reform of the small claims track is undoubtedly required, it would appear that reform is required in a much more measured approach than has currently been put forward.
We will keep you posted.
Note: The content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any particular circumstance.