Cost of motor insurance: whiplash

Written Evidence from the Motor Accident Solicitors Society (MASS) (WL 34)


1. There is undoubtedly opportunity for fraud in the current whiplash claims system which needs to be addressed urgently. Fraudulent claims are one of many factors that have contributed to the rising cost of motor insurance for consumers in recent years, although it is slowly falling. The problem is complicated and has many contributing elements: the under-regulation of Claims Management Companies (CMCs) encouraging claims; the inability of regulators to limit the growth of unwanted SMS and cold-calls to consumers; third-party capture and pre-medical offers from the insurance industry; the behaviour of some solicitors in encouraging claims; distrust of the wider legal community; and societal attitudes towards claims and insurance fraud. The system does need to be reformed and opportunities for fraud eliminated.

2. We are, however, deeply concerned by the growing myth that whiplash is not a genuine injury. It is real and there is a wealth of evidence that demonstrates its potentially debilitating impact and long-term consequences. Preventing legitimate accident victims (93% according to the ABI, with 7% fraudulent [1] ) from being able to claim compensation regardless of the evidence on causation would be a draconian measure and have far reaching implications for not only personal injury law, but justice in general. Suggestions from the insurance industry that the process will be improved (and costs reduced) by effectively removing independent legal advice are wrong, plain unfair and are simply about minimising the amount of money paid by insurers to genuine accident victims and maximising profits.

3. Some of the proposals for reducing the number and cost of whiplash claims are poorly thought through and will entirely benefit the insurer by tipping the legal scales in their favour and increasing profits, and not necessarily benefit the policy holder via lower premiums. In particular, raising the small claims limit would restrict the number of genuine accident victims who could find independent legal advice, leaving them with the choice of pursuing their own claim against an insurance company or not bringing a claim at all.

4. We agree with many of the areas the Government is seeking to tackle, including improving regulation of CMCs, reducing the opportunity for fraud and taking action against unsolicited marketing that encourages fraudulent claims. We also agree that there should be an increased role for medical examinations in the claims process. If managed properly this could help to reduce the levels of fraud by both stopping people who are making a fraudulent claim and acting as a deterrent to those who are considering it. At the same time, preventing insurers from making a pre-medical offer to save them money would go a long way to discourage people from making spurious or exaggerated claims.

What are the costs of whiplash claims and what proportion are due to "exaggerated misrepresented or fabricated" claims?

5. Fraud is regrettably endemic in the UK across all walks of life. In 2011 the National Fraud Authority estimated that fraud is costing the UK over £38 billion a year, with all insurance fraud adding up to £2.1 billion [2] . According to latest figures from Experian, cases of general insurance fraud have more than doubled in the past five years. Between 2006 and 2012, insurance fraud increased by more than 600%. Experian’s figures revealed that 12 in every 10,000 insurance applications and claims in 2012 were fraudulent, a 7% increase on 2011. In 2006, this could be said of only 1.85 out of 10,000 applications [3] .

6. Fraud in the motor accident is undoubtedly part of this and cannot be condoned. Research commissioned by suggests that over 1.7 million (6%) UK motorists would consider making a claim for a personal injury after a road accident, even if they knew they were not badly hurt [4] . The Insurance Fraud Bureau (IFB) has suggested that the figure is higher at 10% [5] . The harsh reality is that motor insurance fraud is seen as relatively easy and, incorrectly, as a victimless crime.

7. Professional criminal gangs undoubtedly contribute a large proportion of fraudulent claims. The IFB says that it is investigating between 30 and 40 so-called "cash for crash" organised criminal gangs at any one time and that these criminal enterprises are costing £392 million per year [6] . Insurance law firm, Keoghs, has warned that cash for crash gangs are now so numerous in all cities, towns and rural areas that no driver is safe from their criminal activities [7] . Insurer LV= has observed that staged car accidents are at a record high with 6% of motorists surveyed believing that they have been the victim of a staged accident in the past two years (2009-10) [8] .

8. Any fraud in the system is to be condemned and we must take action to address it. However, there is little reliable data on its extent. Unfortunately insurance industry figures must be regarded with caution as they group data together, which blurs the edges between outright criminal fraud such as staged accident claims, exaggeration or malingering where there is an initial minor injury, and cases which are abandoned simply because insurers raise the allegation of fraud.

9. The costs attributed to whiplash vary greatly and are largely unsubstantiated (although they have been broadly adopted by the media as fact). The ABI first used the figure of £90 per motorist in February 2012 and this has been used extensively since without any evidence as to its validity. It has further suggested that 20% of motor insurance costs are due to whiplash [9] . Aviva has suggested that whiplash and other claims add £118 per driver and that reform, including money "wasted on legal fees", would reduce car insurance bills by an average of £60 per head [10] .

10. The exaggeration of claims is undoubtedly an issue but it is a complicated area. Certain personality types will always exaggerate while others might try to play down their symptoms. The legal position is that anyone who pursues an exaggerated claim will be penalised in costs and there has been substantial case law in recent years where claimants have been heavily penalised for pursuing exaggerated claims. If insurers think claimants are exaggerating, the tools for them to put pressure on claimants are already there – getting their own medical reports and using Part 36 settlement offers to put claimants at risk (more information is available on this if the Committee would find it helpful) . Examinations by independent medical experts will undoubtedly help address the issue of exaggeration.

11. There is an opportunity for fraud in the current system and this has contributed to driving up claim numbers and premiums, but it is often forgotten that insurers are partly responsible for this via:

(a) Third party capture: insurers contact accident victims directly just on the chance that they might be considering making a claim and offer them money. This is usually around £1,000 and is offered on the basis that it will be cheaper to pay out £1,000 to the accident victim than to have to pay a higher sum plus solicitors’ costs if they do decide to make a claim. Most genuine claimants would be entitled to more than £1,000 in damages for their injuries.

(b) Premedical offers: Once a claim has been made insurance companies will often make a relatively low offer to settle a claim before they have seen any medical evidence that the whiplash claim is genuine. This practice encourages abuse of the system and must stop if we are to reduce the incidence of fraud. A MASS survey of 2520 accident victims suggests that that 33.4% were made an offer by the other driver’s insurance company before they had a medical examination.

12. Insurers say they make pre-medical offers because the medico-legal report process is flawed and always results in a report stating that the claimant is suffering from whiplash injury.   The reality is that they do the maths and have concluded that it is cheaper to pay out £1000 to 10 claimants, two or so of whom might not ultimately have made a claim, than pay-out £4000 including costs to three or four claimants.   The maths has obviously work ed , but a perhaps unintended consequence has been t he knock-on effect with other individuals prone to fraudulent behaviour observe how relatively easy it is to get money for little risk. This trend has undoubtedly played a major role in driving the mindset that every accident results in a whiplash claim. This is of course not the only factor and we discuss these throughout this submission.

13. In recent years motor insurance premiums have sky-rocketed, and only more recently have they started to fall (5.6% in H1 2012), but then only by small margins following massive increases in 2009-10 (+13% in 2009 and +38% in 2011) [11] . The reforms that will be implemented this year will undoubtedly further reduce costs. Law firm, Irwin Mitchell, has concluded that o f the increase (in the cost of insurance premiums) since 2006, 10.3% was from an increase in whiplash claims and 26.3% was down to inflation, but the vast majority of the rise, 63.4%, is unexplained [12] .

14. The question about whether legal costs will come down is no longer relevant. Legal costs have been falling for ten years and the reforms now being introduced in April 2013 mean that costs will fall further, this time by as much as 60%. But premiums will obviously only fall if insurers start passing the savings on to policy holders.  Despite these potentially massive savings, there has been no commitment by insurers that they will pass the savings in full onto the consumer through reduced motor premiums. Insurers have committed in general terms to reducing premiums, but this could be by tiny amounts compared to the potential savings from the Government’s reforms. There has been no commitment to pass the savings on in full through reduced premiums - they must be held to task and consumers must see the difference.

15. It is difficult to predict exactly how much the insurance industry will save as a result of the changes to the personal injury claims system being introduced in April 2013. MASS estimates that it will be as much as £1.4bn (£310.5 m from the end of recoverability of success fees from at fault insurers, £207m from end of Recoverability of After the Event Insurance premiums from at fault insurers and £844.5m from the revised costs).

16. In opposing many of the Government’s reforms, solicitors are accused of simply seeking to preserve their profitability. This is an accusation that could equally be levelled at insurers who, despite protestations, are continuing to make good levels of profit:

· Admiral made £6 on every vehicle it insured in 2012 through personal injury referral fees; earned £18.6m (2012) and £24.5m (2011) from selling customers’ details to personal injury lawyers. Increased profit before tax from £299.1m in 2011 to £344.6m in 2012. Turnover, which takes into account revenue from referral fees, was £2.2bn last year, up from £2.19bn in 2011. UK car insurance delivered a profit of £372.8m - up 19% on 2011's result of £313.6m, primarily driven by higher net premiums. [13]

· Prudential said pre-tax profits rose to £2.8bn in 2012, a 54% increase on the previous year [14] .

· Direct Line Group, the motor insurer spun out of Royal Bank of Scotland, said it made a better-than-expected profit last year as it raised prices and withdrew cover from riskier drivers. Britain's biggest car insurer reported a 2012 operating profit of £461.2 million, up 9.3% on the year and ahead of the £454 million expected by analysts. In its first set of results since its stock market debut last October, Direct Line said the improvement reflected a turnaround in its core insurance business, which swung to a profit of £28.2 million from a £72.3-million loss in 2011 [15] .

Is Great Britain the "whiplash capital of the world"?

17. Describing the UK as "the whiplash capital of the world" may or may not be accurate but it does not appear to be based upon any reliable, current data. This phrase has become a convenient campaign headline - good public policy making must be evidence based.

18. In March 2013 the ABI published figures [16] , stating that whiplash claims accounts for 70% in the UK, 47% in Germany, 32% in Spain and 3% in France. These figures are from a 2004 report [17] produced by a European insurance organisation (now called Insurance Europe). Unfortunately these outdated statistics have now been used by the Ministry of Justice and the Department for Transport.

19. Whilst it is of course absolutely necessary to determine the facts around a subject – particularly an area as complex as whiplash and personal injury claims – it is simply disingenuous and misleading to present 2004 figures (9 years old) as having direct relevance to a current debate about an important area of public policy without correct attribution. Changes to public policy must be evidence-based and if that evidence is lacking it should be sought before proceeding. The presentation of these figures as independent, current and factual only serves to mislead the media and public further about the real issues behind the whiplash debate.

20. According to, who have also highlighted the problem of using data from 2004 to justify current public policy, neither the ABI or the European Insurance and Reinsurance Federation are able to provide more recent statistics.

21. Unfortunately, accurate and comparable international data have been notoriously difficult to obtain. Legal systems are very different across jurisdictions and the terminology/classification of accidents or injuries varies greatly. No-one knows for certain, but there may be other reasons why the UK has an apparently high incidence of whiplash injuries that are worth considering.

22. Whilst the number of deaths from road accidents has been steadily falling over the last decade (3,450 in 2001 down to 1,901 in 2011 [18] , the lowest level in the EU), with the number of reported accidents also falling, the total number of road casualties (including those not reported to the police) is estimated by the Department for Transport to be significantly higher – somewhere between 660,000 and 800,000 with a central estimate of 730,000 [19] . Average car speeds (due to congestion) in the UK are amongst the lowest in Europe and so minor accidents are more common (the number of road deaths per million population in France is double that of the UK (France - 61 per million, UK – 30 per million), in Germany more than 50% higher (49 per million) and double in Italy (63 per million) [20] . In short, the number of fatal and serious accidents may have decreased, but the number of less severe injuries has increased with more accidents.

23. Careful consideration of the terminology and definitions is needed when accurately comparing figures internationally. Significantly more accidents occur in France, Germany and Spain that do not involve cars but bikes or mopeds, which do not result in whiplash injuries.

24. Combined with average speeds in the UK generally being lower than many countries, the UK also has some of the highest concentration of vehicles on our roads in the world (the UK has 77 vehicles per kilometre of road, compared to an EU average of only 43) [21] . The UK also has a higher average occupancy of cars than many countries, so if an accident does occur, more people are likely to be injured.

25. With slower but busier roads and crowded cars, it follows that low velocity accidents with more minor injuries are more likely to occur in the UK rather than high-speed, more serious injuries. These accidents are more likely to be rear end collisions which are more likely to result in whiplash injuries. A number of academic studies (eg. Gordon Bannister, Prof of Orthopaedic Surgery at Bristol University) have shown that 90% of RTA’s occur at speeds of less than 14mph and others that a collision speed of just 5mph produced neck pain (MASS’s own survey of 5042 accident victims suggests 54.8% below 15mph).

26. In a 2008 report [22] , the ABI observed that whiplash could be prevented by the use of anti-collision technology, correct head restraint adjustment and protective vehicle seat design, as well as improving driver behaviour (such as reducing ‘tailgating’). Studies have suggested that a correctly fitted head restraint can reduce the chance of sustaining a whiplash injury by 24% [23] , whilst cars fitted with advanced whiplash prevention systems have a 50% lower risk of sustaining long-term whiplash injuries than those in others cars [24] .

27. More recently this view has been supported by insurer AXA UK, who said in July 2012 that better designed head restraints and car seats could lead to a reduction of over 370,000 claims and save around £1.3bn [25] , a large proportion of the "nearly £2 billion a year in claims for whiplash" claimed by the ABI [26] .

What will be the impact of the Government’s proposals on reducing motor insurance premiums?

Raising the small claims limit

28. We strongly oppose the proposal to raise the small claims limit from £1,000 to £5,000, agreeing with Lord Justice Jackson that it would be inappropriate at this time, and given the reach of the reform package he proposed, to consider raising the small claims limit. Any increase would severely limit access to justice for genuine accident victims. Raising the small claims limit has serious implications that go far beyond just whiplash fraud. It will exclude many genuine claimants from receiving the legal support and compensation they deserve after an accident and dangerous drivers will not be held to account.

29. Examples of the types of injury that could be valued at less than £5,000 [27] include: Minor brain or head injury - £1,575 to £9,100, Less severe PTSD - £2,800 to £5,875, Minor eye Injuries - £2,800 to £6,250, Slight hearing loss or tinnitus - Up to £5,000, Collapsed lung with full recovery - £1,575 to £3,825, Significant hip/pelvis injury - Up to £5,500, Loss of part of finger - £2,800 to £5,600, Fractured nose with surgery - £2,800 to £3,650, Loss of two front teeth - £3,100 to £5,430.

30. Under the small claims track (SCT) costs that can be recovered from the other side are limited and no costs can be claimed for legal representation or for services of a lay representative. As a result, if the small claims limit increased it would mean that claimants will not be able to find legal support for their case, as they will not be able to claim back the cost of doing so. A genuine accident victim will then have three options:

i. Pursue their claim on their own as a litigant in person against an insurance company and their solicitor;

ii. Pay for legal assistance out of their own pocket; or

iii. Not bring their claim, even if they were injured and entitled to compensation.

31. Raising the small claims limit to £5,000 would have implications that go far beyond whiplash fraud. It would:

· exclude many genuine claimants from receiving the legal support and the compensation they deserve after an accident;

· effectively marginalise and render obsolete the RTA Portal in the majority of RTA cases;

· increase the burden on the courts both for the judiciary and the court staff finding themselves dealing with cases in the Small Claims Court;

· increase the cost to the public purse (a potential loss of nearly £40 million in revenue for the DWP and NHS through no longer being able to claim state costs, such as social security benefits or use of the NHS, back from the insurer or paying party);

· encourage Claims Management Companies (CMCs) to fill the gap left by a lack of independent legal advice or support;

· actually increase the chances of a rise in the number of claims being made (through CMCs);

· increase cold calling and spam text messages from CMCs;

· undermine the testing and vetting of potentially fraudulent cases in the absence of solicitors (as officers of the Court);

· mean self-represented claimants being at an unfair disadvantage ("equality of arms") against experienced insurers or representatives for the defence;

· produce large savings for the insurance industry, with no mechanism in place that guarantees the return of the savings to consumers;

· increase the risk of insurers offering lower settlements, exploiting consumer ignorance of the process and the true value of their injury/claim.

32. When the proposal to increase the small claims limit was rejected in 2008 the Government introduced the RTA Portal to help keep costs to a minimum while ensuring victims could have access to justice. In April 2010 a new protocol and electronic portal system was introduced for dealing with RTA personal injury claims, up to a value of £10,000. Since its introduction, over 1.7 million claims have been submitted through the electronic portal system. The Portal is working well and the Government is looking to extend it.

33. MASS believes there has been insufficient consideration given by the Ministry of Justice to how the portal system would be affected and possibly continue if the small claims limit was raised. Raising the small claims limit would mean that the vast majority of RTA cases could not be taken through the Portal. Only claims valued between £5,000 and £10,000 would remain in the Portal, despite the fact that most soft tissue injuries fall below this.

Medical examination

34. We agree with the Ministry of Justice that medical expertise has an important role to play in tackling fraud and believe strongly that no claim should be settled without a medical examination.  In fact, we would go further. We believe that no compensation should be paid without a full medical assessment – no medical, no damages.

35. Requiring reports to be obtained only from wholly independent, approved experts and a principle of no-medical, no damages would help to address the problem of pre-medical offers being made by insurers. This is a process whereby an insurance company will make a relatively low offer (providing a financial saving) to settle a claim before they have seen any medical evidence that the whiplash claim is genuine. This practice encourages abuse of the system and must stop if we are to reduce the incidence of fraud. Preventing pre-medical offers would also help to reduce the volume of whiplash claims, deterring fraudulent claimants who will know they must prove their injury.


36. We do not believe that formal medical panels would improve the system. The proposal of creating new independent medical panels would no doubt be expensive, bureaucratic and unnecessary as there are already independent medical panels which carry out the same function. MASS does not regard the current system to be open to large-scale abuse. Less than 1% of medical reports are obtained from family GPs by either the claimant or the defendant.

37. Measures that moved towards standardised reports might have the perverse effect of making it easier for determined fraudsters to research and rehearse "correct" responses. MASS believes that to have a set of further strict objective tests which the claimant has to pass or fail is inappropriate and in addition may well lead to an increase in fraudulent claims once those "objective tests" are public knowledge.

38. The MoJ should take the opportunity of this review to ban pre-medical offers to help reduce fraud. MASS would suggest that the MoJ discuss with the medical professions’ governing bodies the opportunities available for learning and developing skills in diagnosing whiplash injury. We would recommend a system of accreditation should be introduced instead to ensure that all medical agencies are regulated to a common, high standard.

What will be the likely impact of the proposals on access to justice for claimants who are genuinely injured?

39. As set out in paragraph 30-31 we are deeply concerned that the proposed changes will reduce the availability of independent legal advice, exclude many genuine claimants, putting them at an unfair disadvantage.

What other steps should be taken to reduce the cost of motor insurance?

40. MASS has introduced the ‘MASS Motor Claims Code’ which identifies areas that cause concern and proposes actions to address them. By working collaboratively we believe that the PI industry can be ‘cleaned up’ and improved, without reducing access to justice for the genuine accident victim. MASS believes that a much stronger "stance" on fighting fraudulent claims needs to be taken, where cases are not settled early, even when fraud is detected or suspected, because it is quicker and more economical to do so.

I. Better co-operation between all affected parties to clean up the sector. We need a holistic approach involving government, insurers, the car industry, accident victims, medical professionals and legal professionals.

II. Compulsory medical examinations. No whiplash claim should be settled without a medical examination - no medical, no damages. This would help to reduce fraudulent or exaggerated claims.

III. Robust regulation of claims management organisations. This would reduce the negative impact they have on the industry. Action must be taken to prevent the cycle of firms who have been shut down from re-opening under a different name and with different directors.

IV. Better enforcement of data protection legislation. This would prevent the misuse of customer data, which concerns consumers and brings the industry into disrepute. It would also curtail the use of unsolicited marketing to encourage people to take up fraudulent or exaggerated claims.

V. Better regulation of insurance companies is needed to stop sharp practices such as third party capture (pressuring claimants to settle before the case has been fully considered).

VI. More collaborative approach to combating fraud, particularly around sharing information and data; MASS has been in discussions with the ABI for over a year on developing a system for improved data sharing to combat fraud. MASS urges the MoJ to allow this process to develop to implementation before taking the more drastic measure of raising the SCTL.

VII. Work with medical organisations to develop better knowledge and understanding of what soft tissue injuries can be caused by motor accidents and making sure medical examinations and reports are substantive and objective.

VIII. Continued improvement in vehicle safety to reduce and prevent head and neck injuries.

41. In addition, technology such as telematics could have a role in reducing fraud and bringing down the cost of motor insurance in the future, but it is not a panacea. These schemes are currently unproven and cannot be relied upon as an absolute measure when all circumstances and individuals are different.

42. We also believe that better designed head rests and seats could play a major role in reducing the number of soft-tissue injuries caused. From studies, the factors involved appear to be height  (shorter or taller people impacted by a badly adjusted headrest), gender (studies suggest that females are twice as likely to suffer from whiplash as males), vehicle size/weight and headrests (more elastic seat backs and high head rests positioned to reduce posterior excursion of the head contribute to a reduction of claims by approximately 50% in vehicle fitted with such seats (Kullgren Report).

43. There is no one silver bullet that will solve the issue of whiplash or general fraud. Whilst the current system is not perfect, there are many safeguards in place to protect the accident victim. However, MASS believes that time is needed for the current wave of reforms to bed in and evolve in order to truly ascertain their effectiveness. Furthermore, as indicated in the ‘MASS Motor Claims Code’, we believe that the industry as a whole should work collaboratively, taking a more holistic approach to address the few problems that do exist. Consequently we would strongly urge that no further changes are implemented to allow the industry to work together and the new reforms to evolve.

April 2013

[1] Page 5, Association of British Insurers, ‘No Hiding Place – Insurance Fraud Exposed’, September 2012,

[2] National Fraud Authority, ‘Fraud costs the UK over £38 billion’, 27 January 2011,

[3] Insurance Times, ‘Insurance fraud more than doubles in five years’, 9 April 2013,

[4], ‘Over 1.7 million drivers would consider making a personal injury claim after an accident even if they weren’t badly hurt’, 18 March 2013

[5] IFB, ‘Crash for Cash – putting the brakes on fraud’, 22 November 2012,


[7] Insurance Times, ‘Cash for crash spreads to the countryside’, 26 February 2013,

[8] LV=, ‘Crash-for-cash cheats hit innocent drivers’, 11 February 2011,

[9] ABI, ‘Lifting the bonnet report uncovers the real cost of motor insurance’, 5 March 2013,

[10] The Guardian, ‘Whiplash add £118 to your car insurance bill’, 16 February 2013,

[11] Confused and Towers Watson Car Insurance Price Index

[12] Irwin Mitchell, ‘ Civil Justice Plans To Leave Consumers Short-Changed, Experts Warn’, 12 March 2013,

[13] Reuters, ‘Insurer Admiral’s price website boosts profit’, 6 March 2013,

[14] The Daily Telegraph, ‘Prudential increases dividend as profits rise’, 13 March 2013,

[15] Reuters, ‘Insurer Direct Line profit up on higher prices’, 28 February 2013,

[16] ABI, ‘Fair, independent, objective – ABI publishes proposals to curb the UK’s whiplash epidemic’, 13 March 2013,

[17] 2004 report from the Comité Européen des Assurances (CEA), the European insurance organisations (renamed Insurance Europe in 2011) (

[18] Department for Transport, Reported casualties by severity, Great Britain, 2001-2011,

[19] Page 7, Department for Transport, Reported Road Casualties in Great Britain: 2010 Annual Report,

[20] House of Commons Library, ‘Reported Road Accident Statistics’, 12 March 2013,

[21] The World Bank, Vehicles (per km of road), 2008-12,

[22] ABI, ‘Tackling Whiplash’, November 2008,

[23] Farmer C.M, Wells J.K., Werner J.V., Relationship of head restraint positioning to driver neck injury in rear-end crashes, Accident Analysis and Prevention 31, p722, 1999

[24] Kullgren A., Kraft M., Lie A, Tingvall C., The effect of whiplash protection systems in real-life crashes and their correlation to consumer crash test programmes, 2007

[25] Axa UK, ‘Poor head restraints put two thirds at increased risk of whiplash and may add £1bn plus to claims costs’, 6 July 2012,

[26] ABI, ‘Britain’s pain in the neck culture must be reduced says the ABI’, 19 May 2011,

[27] 11th Edition Judicial College Guidelines

Prepared 30th April 2013