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In this report, our third on the cost of motor insurance, we focus on the impact on premiums of claims for whiplash injuries.
These are soft-tissue injuries, predominantly affecting the neck, caused by a sudden, forceful jerk. They can arise from motor accidents and can have debilitating consequences for those who suffer from them. There are around 500,000 claims for whiplash injuries arising from motor accidents each year. The number of claims has fallen recently but is significantly higher now than at the turn of the century. The relationship between the number of whiplash claims and the total number of road traffic accidents is unclear because of problems with the data on the number of accidents.
There is no generally accepted objective test for a whiplash injury. This, along with the trend for the number of claims to increase, has contributed to concerns about fraudulent and exaggerated claims. There is no authoritative data publicly available about the prevalence of fraud or exaggeration and no consensus about what constitutes fraud. The Government has described the UK as the "whiplash capital of the world" but this cannot be conclusively proved or disproved from the information available. There is scope for the insurance industry to provide better data about fraudulent or exaggerated claims so that there is a better evidence base for policy decisions. However, we accept that some of the increase in the number of whiplash claims will have been due, in the main, to fraud or exaggeration, even if it is not possible to give even a rough estimate of the scale of the problem.
The Ministry of Justice (MoJ) has set out proposals to improve medical reports accompanying whiplash claims and to transfer most claims to the small claims court procedure. We broadly support the Government's proposals on improving medical reports but would like to go further and require whiplash claimants to provide more information in support of their claim, such as proof that they saw a medical practitioner shortly after their accident. In addition, we recommend that the Government bring forward recommendations to reduce the time period during which whiplash claims can be made.
There are good arguments for and against switching most whiplash claims to the small claims procedure but we do not support the proposal at the present time. In our view:
- access to justice is likely to be impaired, particularly for people who do not feel confident to represent themselves. We recommend that the MoJ consider further ways in which litigants in person could be assisted to use the small claims procedure for personal injury claims;
- this change could create new opportunities for claims management companies;
- use of the small claims procedure could prove counterproductive in efforts to discourage fraudulent and exaggerated claims; and
- the impact of the electronic portal for processing claims should be analysed before deciding whether to proceed.
We also make recommendations on data sharing and on whether claims involving an element of exaggeration should be struck down.
There are many factors which contribute to the cost of motor insurance including the activities of claims management companies, the poor safety record of young drivers and competition issues now under investigation by the Competition Commission. We reiterate our previous recommendation for more effective cross-departmental co-ordination of work to reduce premiums.
Motor insurers have committed to passing any reductions in costs arising from legal reforms to consumers in the form of lower premiums. We recommend that the Government explain how it will monitor that this commitment is honoured.
We were surprised to hear that insurers will sometimes make an offer to personal injury claimants even before a medical report has been received. We also note that our previous recommendation on making the links between insurers and other parties involved with claims more transparent has been ignored. Insurers must immediately get their house in order and end practices which encourage fraud and exaggeration. If not, the Government should take steps to protect motorists.
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