Since 2010, the motor claims industry has come under scrutiny and undergone significant reform. Phil Oultram takes a look at what has changed and at some of the emerging trends.
What has changed?
The motor claims industry was once a source of huge profit for claimant representatives. However, with the rise in fraudulent claims and subsequent publicity linking the volume of claims to increased premiums, the public began to ask questions. The Government was not only obligated to look into these trends, but it made political sense to align with public opinion.
As a result, over recent years we have seen the introduction and extension of the claims portal and fixed fees, the abolition of referral fees, and an end to recoverability of additional liabilities. These changes have succeeded in driving down the overall costs of claims while maintaining access to justice.
More recently, attention has turned to the quality and independence of the medical experts upon whose opinions compensation is primarily based. October 2014 saw the introduction of fixed fees for medical experts with a ban on the examining expert offering further treatment. From April 2015, first reports for road traffic soft tissue injury claims must be commissioned via the online MedCo portal which aims to secure the independence of the expert, with a system for accreditation of the experts to be in place before January 2016.
Is it working?
While claimant solicitors have generally accepted the change to fixed fees, we are still receiving some uncapped invoices for expert fees. We do not know whether this is a genuine error or an attempt to increase costs, however, when we limit payment to the fixed fee it is not being challenged.
Defendants are also now able to put forward their own version of events to the medical expert in cases where liability is denied. What we are seeing is that whilst claimant solicitors tend to disregard requests initially, defendant claims handlers will refer back to this request once medical evidence is available and use nonconformance as a negotiating tool.
It is still too early to assess what effect MedCo will have in practice, and there are certain unknowns about the system, including the accreditation process which is yet to be set out. However, in theory these changes should improve the quality of expert evidence.
Since the changes have driven down claimant costs, we have noticed an increase in referrals to rehabilitation, particularly physiotherapy. We are seeing an increasing number of claims where pro-forma invoices have been presented before the treatment has been undertaken, with claimant solicitors asking for compensation of the treatment as an incurred loss.
In most cases, unless it is clear that the claimant would genuinely benefit from early treatment, these claims are resisted and claimant solicitors are asked to present the claim for rehabilitation once treatment is complete. Arguments are made regarding the fact that damages can be more accurately assessed once the effect that the treatment has had on the prognosis is known.
Whilst in theory greater use of rehabilitation and therefore earlier recovery should be a positive, this renewed claimant sector interest in rehabilitation has raised concerns - from additional sessions that were not received to entire rehabilitation treatments being fictitious. Greater scrutiny is needed to ensure that disingenuous treatment claims are resisted.
The introduction of fixed recoverable costs and the ban on recoverability of additional liabilities has enabled more accurate risk assessment. The likely cost of taking a matter to trial has reduced and it has become easier to reserve. As such there are more opportunities to defend cases that might otherwise have been settled on a purely economic basis.
Cost of claims
Compensation values continue to increase ahead of inflation as the bi-annual release of Judicial College Guidelines increases the brackets for each level of compensation together with the general 10% uplift on general damages.
Claimants are becoming more aggressive in their approach to negotiations, putting forward extremely high offers in order to try and maximise awards. Whilst some use this to simply gain momentum and quickly revert to a more realistic footing once counter offers are made, other claimant firms are using these unusually high expectations to force matters to litigation.
The good news is that defendants who make realistic and sensible Part 36 offers can insulate themselves against some of the risk created by these claimant strategies.
Still to come
The focus on fraud continues with the creation of a fraud task force, set up to consider the prevalence and cost of fraud across all lines of insurance. The task force intends to put forward recommendations for ways to reduce the volume and cost of fraud and reduce premiums.
In addition, the Criminal Justice and Courts Act 2015 came into force on 13 April 2015, placing an obligation on courts to dismiss claims for personal injury found to be fundamentally dishonest.
Together with the anticipated progress of the MedCo portal, the number of fraudulent and grossly exaggerated claims should continue to fall. However, as we have seen, this will continue to affect claims behaviour and strategy. It is likely that we will see an increase in claims for other types of subjective conditions such as psychological injury or chronic pain and we may also see claimant representatives turning their attention to other sectors such as casualty, employers’ or public liability claims to try and avoid the restrictions on whiplash claims. Only time will tell.