The Ministry of Justice has advised it will continue with its pre-election proposals to increase the small claims limit for personal injury claims.
In response to a written question, Sam Gyimah (Parliamentary Under-Secretary (Ministry of Justice)) noted that the Civil Liabilities Bill 'will be supported by further secondary legislative changes to the Civil Procedure Rules to increase the small claims track limit for road traffic accident related personal injury claims to £5,000, and for all other personal injury claims to £2,000’.
With new research showing that 80% of road traffic accident claims settled over the past year were for less than £5,000, the implications for the market will be significant. It is hoped the removal of costs recovery will curtail claims farming activities that has historically been a principal driver for claims activity in this area. Indeed whiplash accounts for 78% of personal injury claims in England and Wales, compared with 48 per cent in other EU countries, showing the size of the problem that needs to be addressed.
However with the potential for smaller pay-outs under a tariff system and increased use of the small claims court, new entrants may enter the market, such as claims management companies. This would bring potential problems due to the lack of regulation of these entities and may encourage an increase in cold calling and fraudulent claims. It may also increase the use of paid McKenzie friends who are largely unregulated and, as recent examples have shown, would leave the door wide open for abuse.
Mr Gyimah also confirmed that the fixed tariff compensation proposals contained in the Civil Liabilities Bill will apply to all whiplash claims for injuries lasting up to two years. Both reforms were due to be in force by October 2018, although it is currently unclear whether this timetable remains realistic in light of Brexit. This government has an awful lot on its agenda so it’s hard not to see the potential for this legislation to slip down the running order. Insurers will need to be vocal in their support if they want to ensure these measures maintain momentum.
It is also to be hoped that amendment of the discount rate and the mechanism for setting the rate are dealt with in this package of reforms. The Queen's Speech failed to mention any legislation in relation to the revision of the discount rate. A government response to the most recent consultation was expected in August 2017, however it remains to be seen whether one will be forthcoming. As the briefing note to the Queen's Speech noted there would be room in the Civil Liabilities Bill for wider personal injury reform, it is hoped this much needed reform will be addressed in this legislation.