George Osborne’s Autumn Statement delivered a nasty surprise for accident victims and their representatives- and also the Ministry of Justice who didn’t know about it either. Out of the blue, he announced an increase in the Small Claims Limit for damages for pain suffering and loss of amenity from £1000 to £5000 for all claims. There would be no compensation whatsoever for “minor soft tissue injuries”. As the vast majority of all accidents attract damages for pain suffering and loss of amenity below £5000, victims will lose- and insurers cash in.
The consequences for clients are nothing short of disastrous. If these proposals had been implemented last year, up to 95% of the 759,763 road traffic accident victims in 2014 who were awarded compensation would have been unable to claim for their injuries at all.
Also last year, there were 208,310 claims by those injured at work, through public liability or the fault of occupiers. Up to 85% would have been forced to bring their claims in the Small Claims Court, facing a stark choice. Take on the insurance company alone without a lawyer, or pay the whole of their legal costs from any compensation awarded. Unrepresented injured persons – litigants in person vs hard bitten experienced insurance claims assessor – persuading an overworked District Judge to award compensation? Hardly justice!
Even those injured people who would be prepared to sacrifice a large chunk of their compensation – between 30-40%- to hire a lawyer and pay their outgoings will find it hard to find one. Many specialist personal injury solicitors who are able to work cost effectively through economies of scale will be forced out of business – a recipe for charlatans, the unscrupulous unqualified and higher costs bills from non specialist dabblers.
The financial risk to injured persons and the stress on their nerves is singularly unattractive. So injured persons won’t risk pursuing their otherwise fully justified claims, either with or without a solicitor’s help. What will happen? If they are lucky, they will be approached direct by the insurers who may offer a ‘take it or leave it’ pittance. Ever bigger insurer profits will be made on the back of undercompensated injured victims.
Why is the Chancellor doing this? He claims it will cut £1bn from the cost of motor insurance. He “expects’” the insurance industry to pass this on to motorists to the tune of £40-50 per year. We have heard this before.
The insurers promised to reduce premiums before the last round of anti-victim cuts in LASPO. Even though solicitors’ fees were slashed by 60%, insurance premiums barely moved. Ironically, Mr Osborne has just increased Insurance Premium Tax (IPT) by 3.5%, increasing insurance premiums for everyone. So insurance now costs more and hundreds of thousands of injured persons lose out anyway.
But this is short-sighted ‘back of an envelope’ economics, that doesn’t add up.
The expert Faculty of Actuaries has just reported:
The government announced last week in the Autumn Statement plans to make it more difficult for people to claim compensation for exaggerated or fraudulent whiplash claims, by ending the right to cash payments and the ability for more cases to be taken to small claims court. They expect that these changes could reduce motor insurance premiums by £40 to £50 a year. Our analysis shows that this would be equivalent to stopping all third party injury claims under £13,000. The measures necessary to achieve this could be quite draconian and could affect legitimate whiplash claims.”
Moreover, the Treasury is likely to lose in excess of £1billion from lower recovery of welfare benefits paid to the DWP from successful claims, and loss of VAT, Income Tax and Corporation Tax from the demise of law firms, their suppliers and contractors, as thousands of lawyers and their hard working staff lose their employment and end up on state benefits.
Access to Justice believes this campaign is ‘do or die’ for representation of injured people- our one and only raison d’etre. We intend to fight this tooth and nail with no distractions to ensure that the Government think again.