The Justice Committee has published its conclusions following an examination of the impact of raising the small claims limit for personal injury claims.

Following a lengthy consultation with relevant parties, the Justice Committee has set out its response to proposals to raise the small claims limit for personal injury (PI) from £1,000 to £2,000, and to £5,000 for RTA-related PI claims.

The consultation included the hearing of oral evidence from Lord Keen of the Ministry of Justice and other interested parties in January 2018.

The conclusions can be summarised below:

  • The Committee was concerned by the absence of 'reliable data on insurance fraud' to support the contention by Lord Keen during his oral evidence that there was macro evidence of a claims culture in the UK;
  • The the regulation of claims management companies (CMCs) made via the Financial Guidance and Claims Act, are welcomed, but further measures are need to prevent exploitation of any loopholes. The Committee stated its view that an outright ban would have been more effective;
  • The Committee welcomed the engagement of the Government in working with the insurance industry in development of the new online portal, but were concerned about the technical challenges and ensuring equality of arms to those using the portal;

Proposals

The Committee set out their proposals in response:

  • The current small claims limit for PI should be increased to reflect inflation, calculated from 1999. This would result in an increase to around £1,500.April 2019 was noted to be an appropriate time to make such a change;
  • However, linked to this and the Committee's support of the proposed online portal, they suggested that any roll out be delayed until at least April 2020, thus delaying the proposed change to the small claims tracks limit (excluding EL/PL claims) further.
  • Before introducing the proposed changes to the PI claims process, the Ministry of Justice should review the outcome of the post-legislative review of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012;
  • The Financial Conduct Authority should impose a cap of no less than 20% on the proportion of compensation that CMCs can recover from PI claimants for their services;
  • The Government monitor the effectiveness of the restrictions on cold calling within the Financial Guidance and Claims Act, reporting to the Committee within a year of the restrictions taking effect.

What can we learn?

  • Lowering any proposed increase in the small claims track will be welcomed by the claimant lobby, as the Committee raised doubts about the Government's position that the PI legal sector will "be able to replace PI work with work of equivalent value."
  • The initial response from the ABI was critical of the report stating that it "read like a shopping list of asks from the claimant lawyers."
  • The outcome of the Committee's is perhaps unsurprising given the concerns that were expressed directly to Lord Keen by members of the Committee. During the oral evidence session, he was consistently challenged on the macro evidence of a claims culture in the UK and the number of fraudulent claims reported. Furthermore, the evidence from union representatives about an increase in the small claims track limit for non-RTA claims highlighted their concern that litigation was a driver for standards.Removing redress for workers in their view could result in a lowering of standards;
  • The proposed change increase in the small claims track to £1,500 for PI claims would bring all whiplash claims under 12 months per the proposed tariff system into the small claims track.Tariff settlement for those claims in excess of 12 months up to 24 months would fall outside of the small claims track;
  • Interestingly, one of the proposed amendments to the Civil Liability Bill was that the scope of the Bill be reduced from whiplash injuries lasting up to 2 years, to those lasting up to 12 months;
  • The proposed changes will be introduced via an amendment to the Civil Procedure Rules, which does not need to be approved by Parliament in the first instance. Therefore, it is possible that the Government will disregard the Committee's findings, and push on with the long standing proposals as part of the overall package of whiplash reform.