The Ministry of Justice has announced the small claims limit will be increased to £5,000 for whiplash claims and £2,000 for other personal injury claims.

We previously reported on the Government's whiplash consultation, which outlined proposals to further reform the personal injury market, with the honourable aims of combatting fraud and tackling the endemic compensation culture. Some of these proposals are now being taken forward as part of the Prisons and Courts Bill, due to be published today. The MoJ advises it expects motor insurance premiums to be cut by around £40 per annum as a result of the reforms.

Whilst the Bill will not go as far as the consultation proposals in only raising the limit to £5,000 for whiplash claims, it is likely to materially alter the motor claims market by removing costs recovery for such claims.

Claimant solicitors are therefore unlikely to continue to operate in this space, although there is no reason to assume claimants will have the rights of access to justice affected as the vast majority of whiplash claims are straightforward.

There is concern that claims management companies may take the place of claimant solicitors and regulation will be required to prevent resultant claims farming and other behaviours symptomatic of the UK's compensation culture.

The MoJ will introduce a tariff system for whiplash claims, replacing the JC Guidelines. This will result in a significant reduction in compensation entitlement to make awards more 'proportionate' to the injury suffered (e.g. a 12 month award is reduced from £3,630 to £1,190). Additionally, there will be a ban on offers to settle whiplash claims without providing medical evidence.

The tariff system and the ban will require primary legislation and will form part of the Prisons and Courts Bill. The small claims limit increase would only need secondary legislation and could therefore be introduced as soon as October 2017. However the MOJ has stated they want all the reforms to be implemented together, when the Bill becomes law.