The personal injury reforms announced in the Autumn Statement are to be welcomed. But is Chancellor George Osborne being too bold when he packages them as part of a wider plan to reduce car insurance premium?

This article was first published by POST on 14 December 2015

The personal injury reforms announced in the Autumn Statement are to be welcomed. But is Chancellor George Osborne being too bold when he packages them as part of a wider plan to reduce car insurance premium?

In the spending review delivered on 25 November, Osborne affirmed the government's determination to "reduce the excessive costs arising from unnecessary whiplash claims". He pledged to raise the small claims track limit for personal injury claims from £1,000 to £5,000 and to end general damages for minor whiplash claims. If implemented, a best guess is for these measures to take effect in April 2017.

Five days after the Autumn Statement, Osborne and Business Secretary Sajid Javid launched a 25-page blueprint entitled A better deal: boosting competition to bring down bills for families and firms. The document includes propositions regarding school uniforms, banking, broadband and car insurance, among many markets it doesn't deem open enough.

It confirms consultations on the personal injury reforms will start in the new year. The government estimates the proposed measures could remove £1bn from the cost of providing motor insurance and it expects insurers to pass an average saving of £40 to £50 per motor insurance policy on to consumers.

The determination to crack down on fraud and the compensation culture is to be welcomed. Indeed, the market, including Lloyd's market underwriters, expect claims volumes to reduce. Claimant litigation costs should follow.

It remains to be seen whether any increased limit will be applied to non-motor injury cases. Nevertheless, most personal injury claims now attract awards above £1,000 and fall outside the current small claims limit. An increased limit is, therefore, arguably overdue.

The risk that legitimate legal representation will fall away from claims valued below £5,000 - whiplash-related or otherwise - cannot be ignored. With claimant solicitors unable to recover legal costs in cases that fall below the revised limit, some may retreat from that part of the personal injury market. Such a contraction presents the opportunity for other types of claims management firms to move into the space created. Effective regulation and monitoring of that industry will, therefore, be vital.

Compensators will need to be all the more vigilant towards claims trends and behaviours, including with regard to other areas likely to increase or evolve. The powers of the Claims Management Regulator will also need to be carefully reviewed - and kept under review - to ensure it targets bad practices. Given that the regulator has recently passed some hefty fines towards rogue firms, it seems that it is prepared to show its teeth and provide a level of effective regulation in the industry.

Perhaps unsurprisingly, a petition was created the day after Osborne's announcement, calling for the track limit for personal injury claims to remain at £1,000 in order to preserve access to justice as well as the legal profession. With 20,000 signatures already added, the government is obliged to respond. That the response will satisfy those signatories is unlikely. However, it indicates that the formal consultation is unlikely to be plain sailing. The government will need to be fully aware of the unintended consequences in order to provide a meaningful response.

As always, the devil will be in the detail.