Peers debate whether whiplash injury tariff rates are ‘fundamentally flawed’ or ‘the right level’

When George Osborne first announced the government’s plans for a wide-ranging reform of whiplash claims in 2015, he was still chancellor of the Exchequer and the Brexit vote hadn’t even taken place.

Five and a half years later, new rules setting out the fixed tariffs for such claims inched towards the finishing line as the new Whiplash Injury Regulations were approved by the House of Lords last week.

The new regulations, which have been designed by the government to “simplify” the process of settling whiplash claims, establish a sliding scale for payments.

These will range from £260 for whiplash injuries that last for less than three months, to more than £4,000 for those that result in pain and suffering for up to two years. Claims with a prognosis exceeding two years will fall outside the new tariff, as will those additionally involving another type of injury.

The regulations allow the courts to apply an uplift of up to 20% to the tariff amount in “exceptional circumstances”.

They also bar the practice of settling whiplash claims where medical evidence has not been sought. And road traffic accident-related personal injury cases worth up to £5,000 will be processed as small claims instead of the current £1,000 limit, meaning that fewer potential claimants will be able to recover legal costs.

In the run up to last week’s House of Lords debate on the regulations, the government announced that it would increase this small claims limit for all other types of personal injury, including employers’ and public liability claims, to £1,500 rather than the £2,000 previously proposed.

Possibility for review?

The judiciary is clearly not happy with the new fixed tariffs, as revealed by Lord Wolfson, a junior minister at the Ministry of Justice, when the regulations were being debated last Monday.

He said the Lord Chief Justice had expressed the view that the judiciary should have “greater discretion” over the level of compensation awards.

The minister also said Lord Burnett had pressed for a review of the tariffs earlier than the statutory three years laid out in the 2018 Civil Liability Act, which gained Royal Assent in December 2018.

The peer told the House of Lords that while he is “open to the possibility” of an early review, the government cannot commit to one because it doesn’t know now whether it will have enough data in a year’s time to make an informed assessment.

But, he said the government will analyse the available data once the new system has been up and running for a year to determine whether to undertake an early review.

A spokesperson for Association of Personal Injury Lawyers (APIL) said the increase in the small claims track limit to £5,000 for RTA claims is “completely unjustified”.

This argument is bolstered by new figures, obtained following a freedom of information request by the Association of Consumer Support Organisations (ACSO), which showed that the level of motor accident claims has plunged over the last year.

The data from the government’s Compensation Recovery Unit revealed there were 107,000 motor accident claims in January to March this year, compared to 157,000 in the same quarter in 2021 - a 31% drop.

ACSO’s executive director Matthew Maxwell Scott said the figures undermined the government’s rationale for the whiplash reforms that they will cut claims volumes, which has happened anyway due to the pandemic.

‘Risk’ of claims shift calls for vigilance

During last Monday’s Lords debate, Baroness Ritchie of Downpatrick raised solicitors’ concerns that the methodology for formulating the new tariff rates is “fundamentally flawed”, leading to a level of tariff that is “unfairly low, given the possible severity and duration of the injury sustained”.

However, the debate showed that peers are more concerned that unscrupulous claimants will continue to find loopholes to rip off the insurance industry and ultimately other policyholders.

Lord Hunt of Wirral, who is a partner at defendant solicitors DAC Beachcroft, backed the government’s tariff levels as “the right level to reflect what these cases are really worth”.

While acknowledging that the new regulations will deter many “creative” claims, his fellow Conservative Lord Bourne echoed the ABI’s fears that claimants may shift their focus to additional minor injuries, potentially resulting in higher awards than those on offer via the whiplash tariff. The result would be to “dilute” the beneficial effects of the government’s reforms, he added.

Lord Hope of Craighead, a retired judge who served as the first deputy President of the Supreme Court following its establishment in 2009, warned about the “risk” that other kinds of minor injury will replace whiplash claims.

And Tory peer Lord Naseby said he is “deeply concerned” about the “huge” potential for “quasi-bogus” minor injuries claims from claims management companies (CMCs) and claimant lawyers, which he warned could end up being “dumped” on insurance companies via “mass settlements” by the Financial Ombudsman Service.

Lord Wolfson said he recognised the ABI’s concern that an increase in minor injury claims may lessen the benefits that the reform is designed to deliver for “honest” premium-paying customers.

He added that the government would be “vigilant” to ensure that the purpose of these regulations, which were also considered by the House of Commons last week, is not undermined.

The publication of figures last week by the FCA showed that the number of regulated CMCs has fallen by 80% since 2011, from 3,213 to 623 – this will give the industry some room for comfort.

The new rules on whiplash claims are finally due to come into force at the end of this month (May). However, the insurance industry knows that it would be unwise to relax its guard against bogus RTA claims.