Expert View: Unintended consequences of proposed reforms must be fully assessed

One of the key themes to emerge at a recent Insurance Times Fraud Charter meeting was the importance of fully understanding the potentially hazardous legal landscape if the government’s proposed whiplash reforms, announced in November’s Autumn Statement, proceed. The proposals must be carefully evaluated, as far as is possible when dealing with unknowns, for their impact on innocent accident victims and the legal and insurance sector more generally.

Discussing the potential unintended consequences of the proposed reforms, it was clear that these need to be carefully considered and addressed ahead of the reforms being pursued further. It is clear that claimant lawyers act as a filter to take out bad or poor claims at source, preventing them from proceeding before they even get off the ground. It is also clear that it will not be easy for ordinary people to run their own claims independently, whether online or not, and that they will miss expert representation from lawyers. Whatever your view of lawyers, a typical road traffic accident claim is not straightforward or easy, without help.

The terrifying prospect is that this advice gap will be filled by claims management companies (CMCs). Without the filtering of claims and without knowing what some unprofessional and unregulated CMCs might do or say to ‘encourage’ claims, we suspect the numbers of claims and potentially fraudulent claims may actually increase. The prospect of more cold calling and more dubious marketing practices must be the last thing that is intended by the Ministry of Justice (MoJ).

McKenzie Friends

We discussed the fact that some CMCs are already preparing for a rise in the small claims limit by employing, or even worse, having self-employed, ‘McKenzie friends’ to look after and represent accident victims following accidents, taking a huge cut of their damages for the privilege. There is nothing ‘friendly’ about people with no experience, no professional indemnity insurance and, perhaps in some cases, few morals, representing you after an accident.

As with every government proposal, the whiplash reforms must be accompanied by an impact assessment that evaluates in detail the costs and benefits to the market and every stakeholder affected. This must be thorough and comprehensive, using all available data sources, and must assess the unintended consequences in detail.

I hope that the MoJ officials present at the meeting were listening to those around the table, from all sides of the debate, and to some of the serious concerns expressed. I would not like to see a series of reforms that could make the situation worse.

We have worked for many years to improve the system with improved data sharing, the portal, fixed costs, AskCUEPI, MedCo and the Fraud Taskforce. I would hate to see all that hard work go out of the window on the back of ill-thought out and poorly considered measures.