Cost of motor insurance: whiplash - Transport Committee Contents

3  The Ministry of Justice proposals

32.  Following publication of our two reports on the cost of motor insurance, the Prime Minister hosted a summit with insurance firms on 14 February 2012 to discuss the rising cost of premiums.[54] This led to the publication of the MoJ consultation paper on whiplash claims in December 2012. We were disappointed to hear from witnesses from the legal profession that they had not been invited to the Prime Minister's summit and nor are we aware of any substantive contact with DfT ministers.[55] This is particularly surprising given that legal reforms were clearly under discussion.

33.  The MoJ consultation paper sets out four key areas on which the Government wishes to make progress:[56]

  • Improving diagnosis of whiplash;
  • Developing standards for diagnosis;
  • Challenging questionable claims; and
  • Tackling the perception that exaggerated claims are acceptable.

We dealt with diagnosis in paragraph 13 of this report. In this chapter we will consider the other three proposals.

Medical reports

34.  The Government has set out a number of possible problems with the medical reports prepared in support of whiplash claims and the doctors who prepare such reports:

  • There is no mandatory reporting form, so the information reported can be variable;[57]
  • Opportunities for learning and developing skills in diagnosing whiplash injury may be limited; and
  • Doctors may be biased towards whoever is paying for the work or, if a GP provides a report, may find it difficult to decline to certify an alleged injury because of the relationship which has built up over time between doctor and patient.

The MoJ is consulting on whether a system of independent medical panels, made up of accredited medical practitioners, should be established to assess claims for whiplash injury and give objective, impartial advice to the court. A key feature of this approach would be use of a standardised medical report which would be based on best practice guidance and contain relevant information and evidence supporting its conclusion, such as the date of the accident and the medical notes of any consultation with the claimant's GP or other specialist immediately after the accident. The Government is considering options for peer review of reports and for apportioning costs.[58]

35.  Both insurers and legal witnesses broadly agreed that the Government's proposals were heading in the right direction.[59] The main issue raised was the variable quality of reports.[60] In some cases this was due to poor practice on the part of medical practitioners — Andrew Ritchie QC referred to the danger of "going to the old war horses who have almost given up and ... are no longer in clinical practice"[61] — but the lack of information provided to practitioners was also of concern. For example, Dr Simon Margolis, chief executive of Premex Group, a medical reporting organisation, said:[62]

The way the system works is that we would receive a letter of instruction, either from a solicitor or an insurance company. That may say no more than "Road traffic; neck injury" or it may be more detailed. As the body in the centre trying to get the expert and the claimant together as efficiently as possible, we don't get involved in the actual process of instructing the expert in terms of telling the expert about the circumstances of the accident or previous injuries. Unless our instructing source tells us, then the expert would not know.

He added that it was "now unusual for an expert, particularly in these lower value claims, to see medical records", which could assist in the detection of fraud of exaggeration.[63] David Fisher of Axa Insurance said it was "crucial ... that the reporting doctor has access to both versions of events", so that discrepancies between a claimant's alleged injuries and the circumstances of the accidents could be taken into account.[64]

36.  In terms of peer review, medical experts are responsible to the court for the quality of the reports they provide. However, Dr Andre Brittain-Dissont, an independent medical expert, questioned whether the quality of medical reports was, in practice, subject to judicial scrutiny.[65] Dr Margolis agreed that there was scope for increased audit of medical reports as well as sanctions against bad practice.[66]

37.  We support the proposal that there should be an accreditation scheme for medical practitioners (who need not all be doctors)[67] who provide medical reports in relation to whiplash claims. We also agree that these reports should be available equally to all parties. However, it is essential that the practitioners instructed to prepare such reports are provided with information about the accident and the claimant's medical records. Reports prepared without this information are likely to be of very limited value.

38.  The section of the consultation paper on medical reports makes no mention of the electronic portal used to process most whiplash claims.[68] A standard medical form already exists in relation to claims processed using the portal.[69] The MoJ should explain whether it wishes to mandate for general use the standard medical report form already used for whiplash claims processed using the electronic portal, or introduce an altogether new form. In the latter case, the Government should explain why a new form is needed.

39.  We were concerned to hear suggestions from insurers, such as Axa, that medical reports routinely overstate the likely duration of whiplash symptoms.[70] If true, this is evidence of systemic exaggeration of claims. However, as we have noted, there is a range of views about the duration of whiplash injuries.[71] This is an area in which accreditation of medical reporters, and a focus on best practice, could lead to improvements. It also points to the importance of some form of audit. In our view, a random audit of at least a proportion of medical reports prepared each year is essential. We also question whether existing regulatory bodies such as the General Medical Council could have a role in auditing reports and receiving and dealing with complaints about the quality of reports under these new arrangements. We recommend that the Government consider this issue.

40.  A number of issues raised with us in this area are not mentioned in the MoJ consultation paper. For example, although symptoms of a whiplash injury usually emerge within seven days,[72] and do not usually last for more than one year, claims can be lodged up to three years after the accident alleged to have caused them. Nigel Teasdale of the Forum of Insurance Lawyers said that it was very difficult for a claim to be disproved in those circumstances.[73] Keoghs LLP said that the Government should consider reducing the limitation period for road traffic accidents under £10,000 to one year.[74] The Minister, Helen Grant MP, recently told the House that she had no plans to change the law on the limitation period.[75] We recommend that the Government explain the rationale for the three-year limitation period and bring forward recommendations for reducing it.

41.  Andrew Ritchie QC suggested that it might be desirable to require claimants to support their claims with objective evidence of injury, such as proof that they had consulted a medical practitioner or attended an Accident and Emergency department shortly after the accident, or photographs of the damage to their vehicle.[76] We agree. This is what we had in mind when we recommended that the "bar to receiving compensation in whiplash cases should be raised" by requiring the provision of "further evidence of injury or personal inconvenience arising from the injury".[77] The Government did not comment on our suggestion in its reply to our January 2012 report. We recommend that the Government consult on ways of requiring whiplash claimants to provide more information in support of their claim, such as proof that they saw a medical practitioner shortly after the accident or evidence of the impact of the injury on everyday life. There should be a presumption against accepting claims where such information is not provided.

Use the small claims track?

42.  Civil cases, such as personal injury claims, are subject to different forms of procedure, depending on their size and complexity. Personal injury claims for general damages[78] over £1,000 (but less than £25,000) are currently dealt with using the "fast track" procedure. The MoJ is consulting on raising the threshold for allocating whiplash cases, or personal injury cases more generally, to £5,000. The MoJ states that "sample data has indicated an average value of around £2,500 paid in damages for road traffic accident personal injury claims",[79] so most would switch from the fast track to the "small claims track" if the Government's proposal is implemented in some form.

43.  Raising the small claims threshold for personal injury claims was considered, and rejected, as recently as 2007. The electronic portal for processing claims was introduced instead.[80] The Government said that "with the continuing rise in whiplash claims since then ... we believe the time is right to revisit this issue".[81] However, we have already noted that whiplash claims peaked in 2011 and are now declining.

44.  Switching most whiplash cases from the fast track to the small claims track would have the following procedural implications:

  • The normal procedural rules and strict rules of evidence (including taking evidence under oath) would not apply.
  • Expert witnesses are not usually heard.[82]
  • The recovery of costs is strictly limited: no costs can be claimed for legal representation.[83]

A number of arguments were made about the wider implications of this change:

  • According to the ABI, "the economic case in favour of challenging more claims that insurers suspect are fraudulent or exaggerated" would be likely to improve if the small claims procedure is used.[84]
  • Some claimants may be deterred from making claims or challenging the rejection of claims because they would have to represent themselves or bear the cost of legal representation themselves.[85] Self-represented litigants are likely to come up against legal professional engaged by insurers, leading to a potentially unfair inequality of arms.[86]
  • Without legal representation claimants might settle for less compensation than the amount to which their injury would normally entitle them.[87]

45.  Insurers strongly supported this proposal and suggested ways in which any problems with access to justice could be mitigated.[88] The ABI described the small claims track as "a user-friendly and simple route for settling straightforward low-value claims" and drew attention to existing guides from the Civil Justice Council and Bar Council on using the procedure. It offered to work with the Government, the courts and other stakeholders in helping assist self-represented claimants pursue their claims.[89] In addition, Aviva suggested that claimants would still be able to engage legal representation for small claims using new Damages Based Agreements, whereby a solicitor's fee can be taken from any damages awarded.[90]

46.  The Government suggested that claimants could use 'before the event' legal insurance cover, which is often sold alongside motor insurance, to fund claims using the small claims track. It said "following the implementation of the Government's reforms to civil litigation and costs, we expect a number of new innovative BTE insurance products to be developed for this market".[91] ARAG plc, which sells such policies, said that "less well-off members of society" tended not to buy such insurance and would "face the prospect of representing themselves" in court.[92]

47.  Legal witnesses expressed outright opposition to the Government's proposals.[93] The Association of Personal Injury Lawyers pointed out that an allegation of fraud would lead to a claim being transferred to the fast track, something which it thought insurers would do tactically "to drive up costs and deter the genuinely injured claimant from proceeding with the case". Fear of the court system would deter some genuinely injured people from making claims or drive them into the hands of claims management companies, for whom a "window of opportunity [would] be opened".[94] Desmond Hudson of the Law Society of England and Wales spoke of "very significant issues of injustice" and Andrew Ritchie QC asked "how are those who are old and infirm, those who have mental difficulties and those who are not so well educated going to issue their claim forms?"[95]

48.  It was also suggested that, in settling claims directly, insurers might not offer the level of compensation likely to be awarded if a claim were taken forward by a solicitor.[96] We heard anecdotal evidence of undersettlement of claims but insurers argued that individual cases were not an accurate reflection of the overall situation. Dominic Claydon of Aviva said:[97]

I am aware of cases that have involved solicitors where there has been under-settlement as well ...We believe the way forward is to have standardisation and transparency around the medical reports and, additionally, to have a standard method of assessing quantum ... I don't believe we need lawyers in all cases.

David Powell of Lloyd's Market Association agreed, arguing that the "volume of complaints against insurers settling claims is miniscule compared with the number of claims they settle".[98]

49.  A complicating factor with this proposal is how switching claims to the small claims track might affect use of the electronic portal which is used to process personal injury claims up to £10,000 where liability is not contested.[99] Some 75% of claims are now processed using the portal.[100] Recoverable costs are fixed for each stage of the claim and have recently been reduced.[101] In July 2013, the portal is being extended to cover other forms of claims, as well as personal injury claims up to £25,000.[102] The portal is relatively new and its impact on claims volumes and costs is not yet clear.[103] David Fisher of Axa Insurance suggested that the electronic claims portal could be changed to accommodate self-represented claimants. He said "a similar situation occurs in employment tribunals and in criminal injuries compensation claims, where there is no automatic legal representation".[104] ARAG plc doubted whether litigants-in-person would have the "capacity, confidence or appetite to instigate claims through the portal".[105]

50.  There are good arguments for and against switching whiplash claims of between £1,000 and £5,000 to the small claims track, but on balance we do not support this proposal at the present time. We believe that access to justice is likely to be impaired, particularly for people who do not feel confident to represent themselves in what will seem to some to be a complex and intimidating process. Insurers will use legal professionals to contest claims, which will add to this problem.

51.  It would be financially difficult for many solicitors to assist litigants fighting personal injury claims using the small claims procedure, given the limited fees available. However, we are concerned that some claims management firms might find a way to enter the process, fuelling another boom in their activities.[106]

52.  We are also concerned that use of the small claims track could prove counterproductive in efforts to discourage fraudulent and exaggerated claims. It is not clear how medical and other evidence would be treated: the general presumption in small claims procedure is that expert evidence is not submitted. If an insurer wishes to argue that a claim is fraudulent or exaggerated that would lead to proceedings switching to the fast track, where evidence is taken on oath and such claims can be decided.

53.  The £1,000 threshold for personal injury claims using the small claims track was set in 1991 and cannot be left at that level indefinitely. However, we consider that any proposal to change this threshold should be informed by a fuller understanding of the impact of the new electronic portal for claims on how claims are managed and on costs. We recommend that the Government analyse the impact of the electronic portal on claims management and costs before reconsidering whether to increase the threshold for whiplash claims to be dealt with using the small claims track.

54.  We also recommend that the MoJ consider ways in which use of the small claims track could be combined with the routine submission of expert evidence, such as a medical report, to help restrict opportunities for fraud and exaggeration. The MoJ should consider further ways in which litigants in person could be assisted to use the small claims process, particularly in order to counter the inequality of arms likely to arise in personal injury claims.

Acceptability of fraud and exaggeration

55.  The Government has said that it is working with insurers and other interested groups on measures to tackle perceptions that exaggerated claims are acceptable, building on current notable examples, such as the work of the City of London Police Force's Insurance Fraud Enforcement Department.[107] We recommend that the Government provide further details of what this work involves.

56.  David Fisher of Axa Insurance said that the courts could be too lenient in their treatment of exaggerated claims. He mentioned the case of Summers v Fairclough Homes Ltd which was decided by the Supreme Court in 2012.[108]

Mr Summers had signed a statement of truth to the effect that his claim was in the region of £800,000. He recovered £80,000 and the Supreme Court declined to strike out his claim so that he would receive nothing at all. That is the situation that we face all the time in respect of exaggerated and falsified claims. If there has been injury, the common law allows for the recovery of compensation in respect of the genuine amount of injury, no amount how tainted the claim might be as a whole.[109]

Axa went so far as to claim that "the courts condone fraud and exaggeration in personal injury claims".[110]

57.  In the case mentioned by Axa, the Supreme Court confirmed that it was possible for the courts to strike out claims which are "tainted by fraud" but that this power should only be used "in exceptional circumstances". It rejected the argument that if exaggerated cases are not automatically struck out, dishonest claims will be encouraged.[111] Keoghs LLP said that there was "some irony in this position ... perhaps the Supreme Court was unfortunately correct that claimants exaggerating their claim ten-fold is no longer deemed to be exceptional".[112]

58.  We acknowledge the force of the argument that gross exaggeration of a claim should lead to it being rejected outright, even if there were grounds otherwise to award compensation. However, this is a complex area of law and judicial decisions invariably rest on the facts in individual cases. We recommend that the Ministry of Justice give its view on the issues involved in limiting the right to compensation where it can be shown that a claim is grossly exaggerated.

Data sharing

59.  Desmond Hudson, Chief Executive of the Law Society, described work being undertaken with the insurers to share data on potentially fraudulent claims. However, he described the insurers as "slow and not as helpful and collaborative as I would want them to be".[113] Craig Budsworth of the Motor Accident Solicitors Society said there was currently no sharing of data so that solicitors could be alerted to claimants with a track record of making repeated claims. However, he thought progress was now being made.[114] The Government has also called for greater co-operation between insurers and claimant lawyers to tackle fraud.[115] Insurers and lawyers have a strong interest in preventing fraud so it is disappointing to hear legal witnesses say that progress in data sharing has been slow. We recommend that the Government encourage both parties to establish collaborative arrangements aimed at identifying and deterring potentially fraudulent claims.

60.  We have previously commented on the project to enable insurers to gain real-time access to the DVLA database, to check details such as penalty points and convictions when insurance is being arranged.[116] The Government told us last year that a system could be in place by 2014.[117] We would be grateful for an update on progress with this project.

54   Ev w91 paragraph 4. Also see Transport Committee, 2010-12, Thirteenth Special Report, Cost of motor insurance: follow up: Government Response to the Committee's Twelfth Report of Session 2010-12, HC 1934 (hereafter Second CMI report: Government response) p1. The former Secretary of State for Transport hosted a follow-up meeting with insurers on 2 May 2012 and the current Secretary of State did likewise on 25 March 2013 - see HC Deb, 25 Apr 13, c1068W and 27 Jun 13, c455. Back

55   HC Deb, 25 Apr 13, c1068W. Back

56   MoJ consultation document, p12. Back

57   See paragraph 38 in relation to the reporting form used for claims processed using the electronic portal. Back

58   MoJ consultation document, Part Two. Back

59   For example, Ev 90 paragraph 25, Ev w5 paragraph 3.1, Ev w16 paragraph 38, Ev w27 paragraph 1, Ev w31 paragraph 8, Ev w36 section 5, Ev w38 paragraph VI, and Ev w65-66. For a different view see Ev 48 paragraph A3, Ev w12, Ev w44 paragraphs 16-17 and Ev w69-70 paragraphs 12-13. Back

60   For example, Qq 18-19, 26-27. Back

61   Q235. Back

62   Q132. Back

63   Q129. Back

64   Q201. Back

65   Q137. Back

66   Ibid. Back

67   See Ev 40, Ev 45 paragraph 20 and also Qq 28, 50-51. Back

68   See paragraph 49. Back

69  Back

70   Ev 78 paragraph 3.4. Also see Ev w23-24 paragraphs 1.4, 4.2. Back

71   See paragraph 11. Back

72   Qq 7-8, 136. Back

73   Q270. Also Ev 95 paragraphs 27-28. Back

74   Ev w30 paragraph 35. Back

75   HC Deb, 2 Jul 13, c729. Back

76   Q271. Back

77   Second CMI report, paragraph 8. Back

78   Relating to pain, suffering and loss of amenity but excluding compensation for specific costs incurred eg physiotherapy. Back

79   MoJ consultation document, paragraph 57. Back

80   See paragraph 49. Back

81   MoJ consultation document, paragraph 25. Back

82   Ibid., paragraph 50. Back

83   Ibid., paragraph 52. Back

84   Ev 68 paragraph 16. Back

85   MoJ consultation document, paragraph 65. Back

86   Ibid., paragraph 66. Back

87   Ibid., paragraph 67. Back

88   Aviva suggested that the limit be raised to £10,000 - see Ev 74 paragraph 50 and Q109. Back

89   Ev 68 paragraphs 20-21. Back

90   Ev 74-75 paragraph 55.  Back

91   MoJ consultation document, paragraph 29. The sale of this type of insurance has recently been subject to investigation by the Financial Conduct Authority -  Back

92   Ev w9 paragraph 2.4.1. Also see Ev w44 paragraph 20. Back

93   For example, Ev w1, Ev w13 paragraphs 5-7 and Ev w17 paragraphs 46-57, Ev w19 paragraphs 6-10, Ev w33 paragraph 38, Ev w36-37 section 6, Ev w38 section 4 and Ev w44 paragraph 19. Back

94   Ev 89 paragraphs 16-20. Also see Ev w27 and Qq 318-20. Back

95   Qq 264, 269. Also see Ev w9 paragraph 2.4.5. Back

96   For example see Ev 90 paragraph 30, Ev w3, Ev w17 paragraphs 53-54 and Ev w53-54 paragraphs 4.14-4.20. Back

97   Q209. Also see Ev w23 paragraph 1.5. Back

98   Q108. Also see Q208. Back

99   See MoJ consultation document, paragraph 79. And see  Back

100   Q242. Back

101   See  Back

102   It is also being rebranded as the Claims Portal -  Back

103   See Fenn, P., Evaluating the low value Road Traffic Accident process, MoJ, Jul 12. For comments on the need to review the portal see, for example, Ev w18 paragraph 61 and Ev w19 paragraph 10. Back

104   Q208. Also see Ev w26 paragraph 5.4. Back

105   Ev w9 paragraph 2.4.4. Also see Ev w16 paragraph 44. Back

106   Q318. Back

107   MoJ consultation document, paragraph 24.iv. Back

108   Q170. Also see Q274, Ev 81 paragraph 4.3, Ev 95 paragraphs 25-26, Ev 109 paragraph 67, Ev w26 paragraph 6.4, Ev w29 paragraph 25, Ev w57 paragraph 31, Ev w119 paragraph 105 and WL 43A [printed with this report].


109   Q165. Back

110   Ev 81 paragraph 4.3 and Q 226. Back

111   Supreme Court press summary, Fairclough v Summers, 27 Jun 12, Also see Q274. Back

112   Ev w30 paragraph 26. Back

113   Q248. Also see Ev w44 paragraph 21. Back

114   Qq249, 252. For the insurers' perspective see WL 43A [printed with this report]. Back

115   Ev w96 paragraph 36. Back

116   Second CMI report, paragraph 25. Back

117   Second CMI report: Government response, p7. Back

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