In early January of this year, the UK’s Ministry of Justice closed a consultation on soft tissue injury claims, or whiplash, reform after a seven-week response period. During that time, interested parties were given an opportunity to analyze the significant impact the proposed changes to the claims process relating to whiplash after road traffic accidents would have. The reforms, coming only a short three years after similar measures benefiting large insurers, purport to address the perception of an excessive compensation culture throughout the UK, focused on fast cash for claims that burden the insurance companies and ultimately, raise premiums for motorists.
Within the proposal for reform, the government offered four substantial changes to how claims are handled currently. The first change hones in on the need to reduce fraudulent claims made by dishonest motorists or cash-hungry whiplash victims by altogether taking away compensation paid for pain, suffering, and loss of amenity (PSLA). An alternative to completely dissolving the opportunity for compensation is to cap the total amount paid to no more than £400 per incident. In addition, the reforms propose a denial of any whiplash claim brought against an insurance company that does not come with medical evidence to support it, and an all but forced small claims track for personal injury claims after road traffic accidents.
The combination of these reforms is, according to the proposal, intended to reduce the frivolous soft tissue injury claims and starkly reduce the average amount of a claim, currently at an estimated £1,850. The reduction to compensation amounts, increased maximum for small claims court, and requirement of medical evidence of whiplash is all meant to deter individuals from making claims that may not be substantiated. Although the reform for soft tissue injury claims processes is spun under the guise of saving safe, honest motorists some money each month in insurance premiums, the true motivating force behind the potential changes is clearly an industry interested in higher profits.
The case for insurers
No altruistic driver is apparent in the insurance industry, despite the narrative of wanting to create a more honest, claim-wary population. Instead, insurers have created a story of a growing epidemic of fraudulent whiplash claims, pointing to the detriment erroneous lawsuits cause for the vast majority of motorists. In the opening letter of the reform, the government cites that an increase in whiplash claims has taken place over the last ten years, to the tune 50%. In addition, individuals filing soft tissue injury claims tack on costly attorney fees in addition to pain, suffering, and loss of amenity, creating a substantial blow to the insurance companies and the road users who rely on affordable coverage.
The reality of the soft tissue injury claims issue is not nearly as excessive as insurers might hope to promote. Instead, the cost of claims have fallen steadily for the last five years, and the associated cost to the insured population has experienced a 30% decline since 2010. Yet insurance companies have raked in more than £2.5 billion in profits by slowly increasing insurance premiums since 2013. The rise in cost to motorists can’t be directly correlated to an increase in fraudulent soft tissue injury claims, nor the cost of paying for substantiated claims. Motorists are required by law to hold insurance – the insurance companies have taken that mandate straight to the bank, and now are on the path toward limiting the benefits they provide to road users throughout the country.
A missing piece
Insurers claim to be on the right side of the reform, touting a reduction in premium costs to the insured population by putting an end to abusive whiplash claims. The unfortunate truth is that, while some motorists will be afforded cost savings by way of lower monthly premium payments, others will continue to be left out in the cold. A representative from a personal injury firm dealing with motorcycle accidents in the UK states, “The vulnerable 1%, including motorcyclists, pedestrians, and bicyclists, should be protected from the potential impacts of the proposed reforms, but they stand to be adversely affected instead. Motorcyclists represent just 1% of road traffic but account for 19% of all road user deaths. Given that accidents involving vulnerable road users are often more complex and more severe, the proposed reforms have the potential to keep them from receiving just compensation when they need it most.”
The soft tissue injury claims reform is a singularly focused method to reduce the number of fraudulent claims against insurers. Unfortunately, the perceived benefits of the reform put a heavy burden on the individuals who turn to their insurance companies for the financial assistance they are entitled to after a road traffic accident, especially road users who are more vulnerable to injury. Insurers are standing firm in their narrative that abusive claims work to drive up costs for the average motorist, but the data points to a driving force produced by the need to increase profit margins. The potential £40 savings possibly passed down to safe, honest road users hardly offsets the handcuffs placed on their ability to receive compensation from insurers after a road traffic accident occurs.