Government Response
| Better data |
| We reiterate our earlier recommendation that the Government should act to ensure that there exists better data about fraudulent or exaggerated personal injury claims, so that there is a stronger evidence base for policy decisions. Since the Government has cited the ABI's figures for dishonest claims in 2013 it should explain how the figures have been arrived at and how dishonest claims have been defined. (Paragraph 6)
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6. The Ministry of Justice is currently discussing options to
improve data quality with a number of stakeholders. Work is progressing
with representatives from Claims Portal Limited on the feasibility
of establishing a link between the Claims Portal and the Department
for Work and Pensions' Claims Recovery Unit (CRU) database for
greater alignment between CRU figures and Claims Portal figures.
In addition, Claims Portal Limited is discussing with the Insurance
Fraud Bureau proposals to explore the feasibility of using the
Portal data to assist them in detecting fraud.
7. Claimant representatives,
medical experts and medical reporting organisations have been
working with Ministry of Justice officials to assist with evidence
gathering to inform the development of our reforms. The ABI has
committed to providing baseline data on soft tissue claims. This
data will enable the Government to gain a better understanding
of the types of claims, the level of damages and the period of
time between an accident, claim notification and settlement.
8. The Government does not centrally collect information
on fraudulent or exaggerated personal injury claims and therefore
may refer to data collated via industry sources. Such figures
have not been verified by Government and when used are clearly
marked as having been sourced from industry.
9. The Committee has requested an explanation of
the Association of British Insurers' (ABI) data on the number
of dishonest claims in 2013. This question is best answered by
the industry, and we suggest the Committee writes to the ABI for
a detailed answer. However, for clarification the Government understands
the process to be based on an ABI survey of its membership, which
requests data in response to a list of scenarios in which it is
believed fraud is likely to be involved. Members then provide
the numbers of cases which fall into categories based on the Fraud
Act 2006.
10. These statistics do not include claims which
involve exaggerated personal injury, particularly for whiplash,
where the claim has been paid. Although some of those cases will
have an innocent explanation, it is also true to say that a number
of cases of successful fraud will go undetected. So the ABI fraud
statistics provide a useful indication of the volume and value
of fraud detected by the industry but they should not be considered
an absolute indication of the level of fraud in the industry.
| Use of small claims procedure
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| We recommend that the Government inform us of what work is underway or planned to develop adequate safeguards to protect claimants from adverse consequences of raising the threshold for using the small claims procedure for personal injury cases. (Paragraph 11)
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11. As previously stated, the Government believes
that there is evidence to support raising the small claims limit
for personal injury claims. For now, however, our main focus remains
the implementation of the reforms to medical evidence and reporting
announced on 23 October 2013.
12. Further consideration will be given to this issue
in due course.
| Medical panels |
| Although we welcome the Government's obvious desire to get on with establishing independent medical panels as soon as possible, we are concerned that numerous detailed matters are being decided hastily and, in some cases, without much consideration of different options. We recommend that the Government publish for consultation comprehensive proposals for how medical panels will work, in time for the new system to be introduced by next Easter. (Paragraph 15)
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| In our view, medical reporting organisations should be prohibited from providing reports on whiplash and other soft tissue injuries for claims being pursued by solicitors belonging to the same business structure. Furthermore, a robust accreditation system should provide mechanisms for penalising practitioners whose work is influenced by their view of what the claimant might want in a report. We welcome the Government's intention to act in this area. (Paragraph 17)
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| We recommend that the Government explain how it will prevent small firms being squeezed out by the introduction of independent medical reporting panels for whiplash and related injuries. (Paragraph 18)
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13. The Government has noted the Committee's recommendation and
is currently consulting on changes to the Civil Procedure Rules
and the Pre-Action Protocol for Low Value Injury Claims in Road
Traffic Accidents to implement its proposals in this area. Working
with industry experts, we are developing a new system for commissioning
medical evidence in low value whiplash claims. This will be underpinned
by an IT based allocation process for registered medical experts
or medical reporting organisations. This will break any direct
links between those commissioning medical reports and the medical
experts themselves, removing potential conflicts of interest from
the system. In addition, we propose the establishment of a new
independent organisation representing a cross-section of interests
to operate this system in a fair and impartial way, irrespective
of the size of the reporting organisation.
14. Linked to this will be a new accreditation (and
re-accreditation) scheme for experts, which will include a peer
review and auditing element to identify substandard reporting.
Accreditation will not be limited to doctors; experts from other
disciplines who meet the required criteria may also seek to obtain
accreditation. Accredited experts will be subject to audit and
any who do not continue to meet appropriate standards will face
sanctions such as the removal of, or restrictions applied to,
their accreditation.
15. There is no Government funding available for
this project and it is the Government's opinion that this scheme
must be established and owned by those operating in the personal
injury sector. There will be significant start up costs associated
with developing an IT system and the Government is grateful that
the Association of British Insurers has agreed to meet these costs.
We will ensure that there is a suitable independent governance
structure in place to ensure that the scheme reflects cross-industry
interests and will become self funding through receipt of accreditation/re-accreditation
fees from experts.
16. The Government expects the new system - assuring
independent and high-quality medical evidence - to be in place
by early in the new year.
| Striking out exaggerated claims
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| We call on the Government to clarify how and when it intends to introduce measures requiring courts to throw out compensation applications in full where the claimant has been fundamentally dishonest. Although we broadly support this initiative we would caution against hasty legislation: the legal issues need to be fully thought through so that the eventual solution is effective and does not have unintended consequences. (Paragraph 22)
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17. The Government has introduced measures in the Criminal Justice
and Courts Bill, which is currently before Parliament, to tackle
personal injury claims where the claimant has been fundamentally
dishonest.
18. These measures provide that in any personal injury
claim where the court finds that the claimant is entitled to damages,
but is satisfied on the balance of probabilities that the claimant
has been fundamentally dishonest in relation to the claim, the
court must dismiss the claim entirely unless it is satisfied that
the claimant would suffer substantial injustice as a result.
19. This provision applies in both "primary"
claims (for example where the claimant grossly exaggerates his
or her own claim) and "related" claims (for example
where the claimant colludes in a fraudulent claim brought by another
person in connection with the same incident or series of incidents
in connection with which the primary claim is made).
20. The clause also contains supplementary provisions
to:
· require
the court to record in the order dismissing the claim the amount
of damages that it would otherwise have awarded;
· provide that
where an order for dismissal is made, the court may only require
the claimant to pay the defendant's costs to the extent that they
exceed the amount of damages recorded in the order; and
· provide for
the order for dismissal to be taken into account in relation to
the disposal of any proceedings relating to the same dishonest
conduct against the claimant for contempt of court or criminal
prosecution.
21. The
Government welcomes the Committee's support for action in this
area, and considers that these provisions will address the issue
of fundamentally dishonest claims in a fair, proportionate and
effective way. We expect the Bill to achieve Royal Assent before
the end of this Parliament, with commencement to follow shortly
thereafter.
| Inducements to claim |
| Inducements to claim are likely to have encouraged fraudulent claims so we support the Government's intention to ban them. We call on the Government to publish details of how and when this change will be made. (Paragraph 25)
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22. The Government banned the payment of inducements by claims
management companies with effect from 1 April 2013. In conjunction
with other Government reforms, this ban has led to a substantial
reduction in the number of claims management companies now operating
in the personal injury sector, from 2,553 companies in 2012 to
1,125 companies in 2014.[3]
23. Following calls from key stakeholders in the
market - such as the Association of Personal Injury Lawyers and
the Motor Accident Solicitors Society - for the ban to be extended
to cover lawyers, the Government decided to take action. On 23
July 2014, a clause was introduced into the Criminal Justice and
Courts Bill to prevent solicitors offering money or gifts such
as tablet computers to encourage personal injury claims.
24. This measure complements other Government initiatives
which have been introduced to help discourage fraudulent, exaggerated
and trivial personal injury claims and to provide significant
benefits for consumers, businesses and local authorities.
| Pre-medical offers |
| We are in no doubt that fraudulent and exaggerated claims have been encouraged by the insurers' practice of paying out for whiplash claims without requiring a medical examination. We strongly agree with the Government's intention to prohibit such offers, as part of the new system for independent medical panels for diagnosis and reporting. (Paragraph 28)
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| Problems caused by claims for injuries sustained months or years ago could be ameliorated by reducing the period in which claims can be made or by requiring firmer contemporary evidence of the impact of the injury. We have made the case for these changes previously, although the Government has not yet been persuaded. In our view, these changes will be required to make the system work effectively. (Paragraph 29)
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| It is unfortunate that the ABI should argue that action to tackle fraudulent and exaggerated claims, by insisting on medical examinations, will increase premiums. We would have hoped for a firmer commitment from the industry to driving out fraud. In our view, money saved from reducing fraudulent and exaggerated claims should more than compensate for any extra costs resulting from more stringent requirements for dealing with whiplash claims. (Paragraph 30)
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25. As stated in its response published on 23 October 2013, the
Government is attracted to the idea of a rule to ensure that a
medical examination and report are completed before a claim can
proceed. However, following further discussion with stakeholders,
it is apparent that this is a difficult issue and a new rule alone
is unlikely to be sufficient to address this particular problem.
26. For that reason, we have amended the Pre-Action
Protocol for Low Value Personal Injury Claims in Road Traffic
Accidents (the RTA Protocol) to actively discourage pre-medical
offers. The amendments provide that where a defendant's offer
to settle is accepted before the defendant receives the fixed
cost medical report; it will carry no costs consequences until
after the report has been received. Some stakeholders are of the
view that the whiplash reform programme will itself remove the
drivers for pre-medical offers.
27. We will keep this matter under review and will
continue to work with key stakeholders on further ways to tackle
this issue effectively, as needed.
| Claims for psychological damage
|
| Once proposals for independent medical panels for whiplash injuries have been implemented and shown to work, the Government should be prepared to extend their scope to other types of injury if necessary. We also recommend that the Government press the Solicitors Regulation Authority to stop some solicitors from playing the system to maximise their income from unnecessary medical reports. (Paragraph 33)
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28. The Government has been monitoring the number of low value
RTA claims in which a psychological report has been commissioned.
Whilst there has been a marked increase in the number of these
reports, overall the numbers remain low. Table 1 identifies the
number of claims registered with the CRU since 2009/10 that were
labelled as either 'post traumatic stress', 'PTSD' or 'psychological'.
These figures are broken down by whether 'whiplash' was also mentioned.
Table 1 - Number of Claims Registered with CRU
labelled as either 'Post Traumatic Stress Syndrome' (PTSD) or
'Psychological' and 'whiplash'[4]
| Year
| Claims for Post Traumatic Stress Disorder (PTSD) and psychological trauma, with no whiplash element
| Claims for PTSD with 'whiplash' included in the injury description
| Total
|
| 2009/10 |
2,745 | 1,457
| 4,202 |
| 2010/11 |
2,715 | 1,383
| 4,098 |
| 2011/12 |
3,091 | 1,560
| 4,651 |
| 2012/13 |
3,341 | 1,473
| 4,814 |
| 2013/14 |
3,463 | 1,685
| 5,148 |
29. The Government has taken steps to control this potential growth
area by introducing amendments to the RTA Protocol and related
Civil Procedure Rules. These changes emphasise the expectation
that there will usually only be one report commissioned in low
value RTA claims (except in exceptional circumstances). The revised
Protocol only allows for a secondary specialist report to be obtained
where the initial examination identifies a justifiable need for
this, which we expect to be rare.
30. We believe that these measures will provide an
effective and proportionate control.
| Policing |
| We expect the insurance industry to continue funding the police Insurance Fraud Enforcement Department (IFED) in the long-term: we recommend that the Government oversee IFED's funding arrangements to make sure that the unit has a long-term future. (Paragraph 35)
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31. The Government agrees with the Committee that the work performed
by the Insurance Fraud Enforcement Department (IFED) in tackling
insurance fraud is extremely important and should continue. We
were pleased to note that the insurance industry recently reinforced
its commitment to fighting fraud by agreeing to continue to fund
IFED by £11.7 million.
32. This will ensure that IFED is fully funded for
the next three years, and the Government will continue to monitor
its performance. To date IFED has made 430 arrests and secured
223 police cautions and court convictions.[5]
| Data sharing |
| We are pleased to note that better data sharing to tackle motor insurance fraud is now beginning. We share the Government's wish to see results as soon as possible, but it will also be important to get the details of the scheme right. In particular, data sharing should be compulsory: otherwise, only the most reputable firms will take part and the impact on fraud will be limited. (Paragraph 36)
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33. Lord Faulks QC, Minister of State for Justice, wrote to representatives
of the ABI, the Law Society, the Motor Accident Solicitors Society
and the Association of Personal Injury Lawyers earlier this year
to urge them to continue their productive discussions on data
sharing. This has resulted in an agreement in principle to share
data held by insurers on potential claimants to help combat fraud
at source. We are supporting the industry to take this work forward
as a priority. The Government firmly believes that such sharing
of data is crucial in the fight against fraudulent claims.
34. We are currently consulting on a new requirement
for claimant representatives to perform a 'previous claims' check
on potential clients. This will ensure that the sharing of data
at the early stages of a claim is firmly embedded in the civil
justice system.
3 Claims Management Regulator: 2013/14 annual report
https://www.gov.uk/government/collections/claims-management-regulator-annual-reports Back
4
Department of Work and Pensions Claims Recovery Unit snapshot
data taken between May 2013 and July 2014.
Figures may be revised in future snapshots. Back
5
Insurance Fraud Enforcement Department press release:
http://www.cityoflondon.police.uk/advice-and-support/fraud-and-economic-crime/ifed/ifed-news/Pages/Insurance_industry%E2%80%99s_%C2%A311.7m_investment_will_fund_expansion_-of_Insurance_Fraud_Enforcement_Department-.aspx Back
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