The Transport Select Committee (TSC) has published its fourth report since 2010, dealing with the cost of motor insurance. The report notes that the committee’s inquiries have uncovered a ‘highly dysfunctional market’. This latest report reviews the Governments plans to tackle fraudulent and exaggerated motor insurance claims for whiplash injury. It considers the Government’s response to the proposals set out in the third report in 2013 and highlights the further action required.
Increase to the small claims limit
In December 2012, the Ministry of Justice (MOJ) recommended increasing the small claims track limit for whiplash claims from £1000 to £5000. There was a mixed response. Insurers backed the proposal on the basis that it would catch most whiplash claims and so limit costs. Claimant representatives argued that an increase would impede access to justice. The Government elected to further scrutinise the proposal and consider safeguards to ensure that a claimant’s access to justice is maintained. The TSC now invites the Government to publish details of what work is underway to develop the necessary safeguards.
From an insurer perspective, the opportunity to limit costs liability by increasing the small claims track limit is welcomed.
Creation of independent medical panels
The Government has proposed that medical reports for whiplash claims be supplied by independent medical panels comprising accredited professionals using a standard report form. However, there is uncertainty about how this will work in practice. For example, when medical records will be made available, how the standard report forms will integrate with the electronic claims portal and how the panels will be regulated. The TSC recommends that the Government publish comprehensive proposals for how these panels will work for subsequent consultation.
We anticipate that the introduction of independent medical panels will go some way to improve the quality and therefore value of medical evidence for whiplash claims. From a defendant perspective, financial independence of medical experts is key to the integrity of their evidence. However, we share the TSC’s concerns that the process for implementing this scheme is unclear and needs clarification.
Ban on pre-medical offers
Some insurers will, in limited circumstances, make offers to settle third party claims without medical evidence. They raise concerns that medical reports are not always appropriate, specifically when the claim is for a subjective injury such as whiplash or a minor injury that has resolved by the time of examination and contend that paying for medical reports in such instances merely increases costs.
The TSC firmly believes that settling claims without medical evidence is a significant contributor to fraudulent claims and wholeheartedly supports the government’s proposal to prohibit pre-med offers for whiplash claims. The TSC recommends that the ban be brought in as part of the new system for independent medical panels.
The intention behind this proposal is clear, but a blanket ban on premedical offers for whiplash claims is prescriptive. Tighter guidelines on when an insurer can exercise their discretion to settle a claim without medical evidence would perhaps be more appropriate.
Claims for psychological damage
The TSC raises concerns that some claimant solicitors are indiscriminately ordering additional medical reports for psychological injury merely to increase costs. The TSC invites the Solicitors Regulation Authority to discourage this practice and suggests that once independent medical panels are established, they be extended to cover other types of injury.
We agree that steps need to be taken to address the practice of commissioning unnecessary reports, perhaps by making recovery of the cost of the report conditional on a recommendation from the independent medical panel.
Ban on incentives
It is widely accepted that offering inducements to potential claimants encourages fraudulent claims. Claims management companies were prohibited from offering inducements in 2013 and the MOJ now backs proposals to extend the ban to solicitors. The TSC agrees with the proposal, but calls for clarity on how and when the ban will come into force.
In our view, the prohibition of inducements is an essential step toward tackling fraudulent claims.
Action to challenge dishonest claims
The MOJ has recommended that courts should dismiss any claims found to be fundamentally dishonest. The Criminal Justice and Courts Bill currently passing through Parliament includes a clause providing specifically for a claim to be dismissed in its entirety where there is a finding of fundamental dishonesty, unless dismissal would result in substantial injustice to the claimant (click here for further discussion). The TSC welcomes the proposal in principle, but cautions against hasty legislation.
While there is some uncertainty about how the concept of fundamental dishonesty and substantial injustice will be defined, the Bill sends a clear message that dishonesty will not be tolerated and this aim should, in our view, be welcomed.
Better data sharing
The TSC has previously suggested that better data sharing between insurers and solicitors will help tackle fraudulent claims. However, progress has been slow. The TSC recommends compulsory data sharing to identify fraudulent claims.
In our view, better data sharing should be encouraged but we would caution against making it compulsory.
Continued support for the Insurance Fraud Enforcement Department (IFED)
IFED was set up in July 2011 as a police body to investigate and prosecute dishonest claimants. The TSC believes that IFED acts as a necessary deterrent to would-be fraudsters and expresses concern that future funding is uncertain. The TSC urges the Government to ensure funding is in place to secure IFEDs long term future.
In our experience, IFED provide crucial support in the fight against fraudulent and exaggerated claims and we support the TSC’s recommendation. We propose that IFED should expand with a further hub in the north.
The TSC report invites the Government to take further action to implement these recommendations, and encourages concerted efforts to tackle fraudulent and exaggerated personal injury claims. The TSC also encourages the Government and insurers to provide better data about fraudulent and exaggerated claims so that there is a stronger evidence base for policy decisions.
Many of the recommendations within the TSC report are underway already. However, progress is unclear and the industry will no doubt welcome clarification.