Access to Justice

Craig Tracey Excerpts

Wednesday 11th January 2017 Westminster Hall

[Craig Tracey (North Warwickshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Davies. I will speak about reforming the soft tissue claims process. I have a special interest in the subject: I am chairman of the all-party group on insurance and financial services, and I spent 25 years as an insurance broker, 20 of those running my own business, so it is fair to say I have seen the evolution of these claims. When I first started in the industry, whiplash or soft tissue injury claims were non-existent, but over time they have grown to be a significant industry which, as we have heard, costs motorists anywhere between £40 and £90 extra on their policy. Critically, it is an industry where in many instances the claimant is not the main beneficiary.

Although the amounts of compensation paid out in soft tissue claims are relatively small, the associated claims handling costs, including the costs of investigation, processing, lawyers’ fees and medical reports, are disproportionately large. For example, a claimant claiming about £1,000 may ultimately cost the insurer two or three times that amount. As such claims are pretty common—there are about 800,000 a year—the effect on motor insurance premiums is significant.

I will focus on two key areas of the reform proposals, the first of which is general damages. It is clear that the reforms in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 have not had the desired effect of tackling the compensation culture. They went some way to tackling issues such as referral fees, but frequency of claims has not been tackled as claimants can still enter into a no win, no fee agreement and a substantial portion of their claim is taken by the lawyer or claims management company to cover legal fees, so claimants sometimes get only half of the amount awarded to them. Is it access to justice when somebody else benefits more than the person who was injured in the first place?

To highlight the scale, although it is fair to say that the number of claims described as whiplash registered with the DWP’s compensation recovery unit has decreased, as mentioned by the hon. Member for Wolverhampton South West (Rob Marris), that is coupled with a corresponding dramatic increase in the number of soft tissue injury claims for neck and back injuries. In 2015-16, the number of road traffic accident soft tissue injury claims rose by 5.8% from the pre-LASPO level of 2012-13. However, in the period before LASPO was introduced, there was a particularly high volume of claims as claimant lawyers rushed to submit claims to avoid the reforms. This can be seen when looking at the total number of soft tissue injury claims in 2013-14, with the total number of claims in 2015-16 decreasing by only 0.3% over the previous two years, and in fact increasing by 1.2% from the previous year.

The claims portal, which is used to process low value personal injury claims in road traffic accidents, demonstrates even more clearly the rising number of claims following the LASPO reforms. On the portal, although the number of claims notified decreased by 3% from the pre-LASPO high in 2012-13 to 2015-16, the number of claims notified actually increased by 11% in the two-year period of 2013-14 and 2015-16. It highlights how the number of people claiming whiplash injuries in 2011-12 was 543,899 and the number of people who had neck, back and soft tissue injuries in the same period was 285,000. The number of people claiming neck, back and soft tissue injuries increased to 441,000 in the period 2015-16, so we can see it has been displaced.

My second point relates to the small claims track. The threshold needs to increase for whiplash, as the current limit has not been increased for 25 years. Figures from the ABI show that in 1991 50% of claims would have been valued within the SCT limit. That dropped to 9% in 2012, which highlights that an increase is well overdue as 91% of pain, suffering and loss of amenity claims now fall outside its remit, which cannot be in the best interests of the consumer.

From my discussions with the insurance industry, it is clear to me that it supports the principle that full compensation should be given for more serious injuries, and it is committed to simplifying and streamlining the process so that savings will be passed on to the consumer and the policyholder. Critically, there will be access to justice for everyone. Claimants with more minor injuries will still get their vehicle repaired, there will still be access to loss of earnings compensation and, rightly, there will be a focus on rehabilitation. Having dealt with such injuries for many years, that is what most people want. They want to be back in the position they were in before the claim. It is right to ask why there should be a link to a cash settlement on top of this when many of the minor injuries that we are talking about are similar to those sustained on sports pitches around the country day in, day out, where no one would give a second thought to making a claim against an opponent.

The UK is still one of the safest places to drive in the EU and vehicles are safer, so it is important that we go ahead with the proposals made in the former Chancellor’s autumn statement.