We have all had the scenario, rushing to answer the phone only to an automated message asking whether you have been injured in a car accident. This is just the tip of the iceberg when it comes to the problems that the Civil Liability Bill – otherwise known as Whiplash Reforms – aims to solve when it becomes law.
On 20 November 2018, the Civil Liability Bill passed through the House of Lords. The next step is Royal Assent, which will make it law. Politicians have long grappled with the Bill, which seeks to bring about reform in the process for whiplash claims.
Cold calling and exaggerated claims are rife in the UK
Whiplash is a common injury for motorists and passengers involved in collisions and other traffic incidents. The injuries can be minor yet receive pay-outs in the thousands. The compensation culture around whiplash claims is common knowledge – as is the fact that many of these claims are exaggerated or even fraudulent. Despite a reduction in the number of reported road accidents, related Personal Injury claims are 50% higher than a decade ago1. Many blame this cultural issue for driving up the costs of insurance premiums.
A survey of over 10,000 drivers revealed that 63% had received a nuisance call in the last 12 months, with 88% of those affected stating that they had been called on multiple occasions2. Following the news that the Queen’s Speech, on 21 June 2017, made mention of the new legislation, one industry expert told The Telegraph, “The UK is the world capital for whiplash claims.”3
What changes will the Bill make?
Under current legislation, claims for whiplash are often settled without any medical evidence. This presents problems for both insurers and claimants. If the claimant has not sought medical attention, then they do not have a proper understanding of their injury. This could prevent them from receiving the correct amount of money. It could also be detrimental to their health.
When insurers understand the severity of an injury, they can ensure that the claimant receives an appropriate sum. This may be stating the obvious, yet existing laws do not make this kind of provision for whiplash claims. The Civil Liability Bill will make medical evidence a legal requirement for whiplash claims, taking the guesswork out and putting common sense in its place.
As Simon Clarke MP put it in the House of Commons: “The Bill is designed to make sure there is a closer connection between whiplash claims and medical evidence by introducing a ban on seeking or offering to settle whiplash claims without the appropriate medical evidence. That will discourage fraudulent claims, encourage insurers to investigate claims properly and protect genuine claimants from accepting a settlement without knowing the full extent of their injury.”4
Changes will also be made to the small claims track, a court procedure for handling disputes of £10,000 or less in cases where there is a defendant. The lower limit currently stands at £1,000 for minor injuries. With the introduction of the Bill, this will increase to £5,000 for road traffic injury claims. This reflects the reality of claims for minor injuries – lower value claims can incur disproportionately high legal costs.
A fixed tariff system for whiplash compensation and a simple online process for claims registration are to be introduced alongside this legislation. This will mean a far more straightforward claims process.
The Personal Injury Discount Rate relates to a lump sum award for future losses. It should maintain claimants in the same financial position as they would have been without being injured, with the expectation that the award will be invested. The Bill will make changes to how it is calculated, with claimants viewed as ‘low risk’ investors rather than ‘no risk’ investors, to reflect the realities of investment and avoid overpayment. This is expected to have a positive knock-on effect for the NHS and other organisations with large Personal Injury Liabilities.5
A fairer system is on its way
For insurers, the Civil Liability Bill means that the cost of whiplash claims will be curbed, with less time spent processing claims for minor injuries too. As whiplash claims without medical evidence will be banned, fewer resources will be misspent on fraudulent claims.
“The Bill is fantastic news and represents a fairer system which balances care and compensation for genuine injuries while removing excess costs,” said Rob Townend, managing director of Aviva UK’s general insurance business. “The result will help to make motor insurance more affordable for us all.”6
With the date for Royal Assent yet to be set, the circus of the whiplash claims industry will continue to rumble on, with thousands awarded for unevidenced minor injuries, until the Bill becomes an Act of Parliament. This could be as late as 2020.
However, the direction of travel is clear: cold calls, fraud and exaggerated claims will soon be replaced with transparency, accuracy and common sense. And, as motor insurance premiums continue to fall, it appears that the UK’s image as the ‘world capital’ for whiplash claims is set to finally diminish.