Here’s Tom Jones of Thompsons Solicitors on whether increasing the small claims limit for personal injury claims from £1,000 to £5,000 is really in the interests of consumers.
‘A win for the consumer’ is how one car insurer described government plans to remove the entitlement to legal costs in road accident claims worth under £5,000. The Government has proposed that road accident claims are handled in the small claims court, and that the limit for these claims should be increased from £1,000 to £5,000.
The Government says the reform is part of a ‘crack down on the fraud and claims culture in motor insurance’ and will generate £1bn in annual savings (an ‘average saving of £40 – £50 per motor insurance policy’), which the Government ‘expect’ the insurers to pass on to consumers.
But is the problem of ‘fraudulent’ whiplash claims as big as insurers say it is? And what could the impact be for you?
How big is the ‘whiplash’ problem?
Unfortunately fraud almost certainly exists in motor claims, but it’s difficult to tell how big it is. There are no independently verified figures and the Government gets its figures from the insurance industry, who include cases where they have ‘suspicions’ even if they aren’t proved or pursued.
Despite the extremely wide definition given to it, ‘fraud’ accounts for less than 5% of all claims and the number of convictions for motor insurance fraud are a small fraction of this, hardly the ‘pandemic’ one insurer has described. And the answer you would’ve thought is simple – if it’s fraud, don’t pay out.
One thing, however, isn’t in dispute: the insurers are paying out far less in claims than they were. Their own figures show that claims costs were 29% lower in 2014 than in 2010 – a saving of £2.42 billion – and profits and dividends are at an all-time high. Direct Line reported a 14% rise in profits in 2015 and paid out £689m in dividends.
Will insurers pass on savings to consumers?
The Government says it won’t intervene to force insurers to pass on savings, saying premium prices are ‘a commercial matter’ that can be left to an ‘intensely competitive’ market.
In fact, the car insurance market is dominated by five companies that between them account for 57% of all motor policies in the UK and lower claims costs in 2014 haven’t translated into lower premiums. Prices increased in 2014 and have been on an upward trend since.
Should motorists stop having a right to legal representation?
If the small claims limit for personal injury claims is raised, injuries including for example permanent scarring will be treated by the courts in the same way as a claim for a broken washing machine. People injured on the roads will only be able to have a lawyer help them if they pay for it upfront or out of their damages. Alternatively, they will have to take on the insurer’s negotiators and lawyers on their own, in their own time.
So, what do you think; are these proposed changes to the small claims limit for personal injury claims in your interests?
This is a guest contribution by Tom Jones. Tom is a senior partner at national trade union law firm Thompsons Solicitors. All opinions are Tom’s own, not necessarily those of Which?