Broken promises

The government has made an extraordinary promise. Whiplash reforms announced by the Ministry of Justice today will save average motorists £40 a year in car insurance premiums. Based on an average of £427 for a comprehensive policy, that’s not insignificant. But it is still pitiful compared with the cost of car insurance in France, a country which has implemented a system similar to the one proposed by the government. According to the consultation paper, French drivers pay 40 per cent less.

Still, major insurers have apparently pledged to pass these savings on to consumers. This is simply impossible to police. The consultation paper has as much as admitted this. In his foreword, Lord Keen of Elie QC says the government ‘will consider taking further action if future premiums do not reflect the reduction in costs’. What sort of action is unclear.

The savings for the insurance industry are estimated at £1bn. This comes on top of a windfall that claimant firm Thompsons has estimated at £8.7bn, based on Association of British Insurers data apparently showing that claims costs have fallen by 30 per cent in the past five years. Yet, the consultation accepts that only 85 per cent of the new savings will be passed on to consumers. This is legislating by headlines.

This consumer interest fanfare that has been played out as background to the announcement is astonishing – and possibly misleading – but the reforms are not unexpected. They’re part of the government’s drive, started with the Jackson reforms, to tackle the so-called ‘compensation culture’ – a concept which continues to be questioned by claimant lawyers.

And the reforms aren’t going to be derailed. This is the direction this particular train is going. By the end of next summer, there will likely be further proposals to extend fixed recoverable costs to claims up to £250,000. These will put the final touches to the wide-ranging costs reforms Lord Justice Jackson set in motion in 2010. But this timeline gives personal injury lawyers time to get involved and ensure key concerns are addressed.

Not everything is bad in the consultation. The ban on pre-med offers is surely good news and should help contain fraudulent claims, tackling the perceived compensation culture along the way. The proposed increase of the small claims limit to £5,000 is more troubling. But there is likely to be support among some of the neutral consultees against that move. Judges who have expressed concerns over access to justice in the context of digital courts will probably add their voices to those of claimant campaigners.

The online courts programme, if comments about access to justice are taken on board, could help address some of the issues at the lower-value end of the market. Firms whose business models have been built on volume – with processes feeding on high numbers and quick resolution – will undoubtedly be affected, as if the demise of Parabis one year ago hadn’t already signalled warnings over such a model’s sustainability. They will have to review this model. For those at the more tailored end, there will be a cost, especially if Jackson LJ proposes to raise the FRC threshold to £250,000. Here again, the ban on pre-med offers could help cut down on expert costs later.

In the meantime, claimant lawyers could do worse than offer to work with the government and defendant practitioners on cleaning up the industry of claims farmers. It may feel counter-intuitive at first but it would show their credentials as key stakeholders prepared to tackle head on the real causes of the perceived compensation culture, such as cold-calling and fraud.

These proposals may only deliver broken promises for motorists but law firms could end up being stronger.

Jean-Yves Gilg is editor-in-chief of Solicitors Journal

jean-yves.gilg@solicitorsjournal.co.uk | @jeanyvesgilg