Whiplash Reform: Are Lower Motoring Premiums on the Cards?
On 31 May 2021, the long-awaited and delayed Civil Liability Act 20181, which includes the Whiplash Injury Regulations, came into force, introducing a new OIC (Official Injury Claim) self-serve portal for those incurring whiplash claims under a value of £5,000, to run alongside the existing Ministry of Justice portal, which has existed since 2010.
The intention was to both reduce the size of personal injury claim payouts for whiplash, by stripping away the legal representation costs which inflated them, and to reduce the influence of claims companies, to again lower the final sums paid out. Now, if a claimant with a whiplash claim under £5,000 in value wants legal representation, they will have to pay for it themselves. The long-term vision of the reforms was both to combat fraud and inflated claims, thus delivering lower motoring insurance premiums, but is this likely to happen?
Whiplash has been defined in the regulations as a sprain, tear, rupture or lesser damage of muscle, tendon or ligament in the neck, back and shoulders, or an injury of soft tissue associated with muscle, tendon or ligaments in these parts of the body.
The new OIC system introduces two set tariffs for whiplash injuries, which fall within these definitions and last up to 24 months. A lower tariff operates where there is no psychological injury, and a combined upper tariff covers claims which include psychological injury. A 20% uplift in tariff can be paid in “exceptional circumstances.”2
The fixed award limits, within each of the specified time frames, are significantly lower in value than the average cost of claims previously awarded. It all seems like good news for the insurance sector and for motorists, to whom savings have to be passed on, under the terms of the new regulations.
However, there are drawbacks and loopholes within the new system. Firstly, it only applies in England and Wales, and only adults process their claims through the new system, so any claims including children, such as schoolchildren suffering whiplash on a bus journey to school, will be processed as before. Similarly, the regulations only apply to occupants of vehicles, not to motorcyclists, pillion passengers, pedestrians, cyclists, wheelchair or mobility scooter users or horse riders. They will similarly not apply to the rising number of e-scooter users.
Secondly, the average person – the litigant in person – is likely to be overwhelmed by the portal and could still seek professional advice. Increased sales of legal expenses policies could follow in the wake of the new legislation. Clients with legal expenses cover may still have a means through which to access a claims expert’s assistance, and early claims received by insurers show that the involvement of the claims company has not gone away as anticipated.
There is also the danger of a claims company encouraging their client to file a lower-value claim through the portal, knowing the new rules require an insurer to accept or reject liability within 30 days and, if they do nothing, effectively admit liability. Once liability has been admitted, the claims company could then potentially file a larger claim, removing the claim from the portal’s scope. This could see all sorts of medical costs, credit hire charges and legal fees added to the claim once more. How this sort of behaviour would be tackled by the new regulations is not known. As we have seen with PPI, claims companies soon move from one source of income to another, and a further drawback is that the new regulations purely cover whiplash. The portal was introduced to cut down on fraud, but early evidence suggests a remarkable shift away from whiplash injuries to injuries affecting wrists and legs. Claims also showed a predominance of claimants with ‘exceptional circumstances’. One prominent type of claimant has not changed and could work the system in other ways. There is another reason why motor insurance claims may not fall as anticipated. Claims in which the injured party represents themselves invariably take longer to complete than cases in which they have professional representation. If more insurer time is now eaten up with claims, that could result in cost pressures on premiums.
The major challenge of how to defend a claim and deny liability also hangs over the system. All accident evidence has to be in place and uploaded to the portal within 30 days. This will rely on a huge amount of liaison with the insured, as they will need to furnish their insurer with all required documentation within this tight deadline or be deemed liable for the accident. Such documentation will include details of the accident, dashcam, CCTV and video footage, photos of the accident scene, independent witness statements, tachograph and tracker data, reference numbers and contacts of emergency services personnel who attended, and a signed statement of truth from the defendant driver, along with their detailed account of events.
This will not be easy, given that drivers will also be expected to attend any court proceedings, in person, which could again prove difficult. The conclusion we can draw is that it is too early to judge how effective the new Whiplash Reforms will be, or whether or not there will be the downward pressure on premiums that the Government intended. Anyone wishing to reduce their premiums is probably best advised not to rely on the Whiplash Reforms as a route to achieve this, but to work with their broker, to implement better risk management policies and practices, and introduce measures that will help cut the chances of having to make a claim.