At a glance
- Zurich says process is working well following introduction of LASPO reforms and extension of RTA personal injury portal last year
- Overall costs for insurers reduced, albeit offset by an uplift in damages
- Frequency of new motor claims up in January, although the long-term trend is difficult to define due to the large variances in monthly numbers last year
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Zurich is beginning to see real benefits to the extended portal regime for motor insurance as the UK government continues to strive to reduce the number of spurious whiplash claims.
Last July, the government extended the Road Traffic Act personal injury portal to apply to motor claims valued up to £25,000. The process, which sees claims in the portal follow a rigid timetable with fixed costs applied throughout, is part of wide-ranging Ministry of Justice civil litigation reforms aimed at reducing spiralling personal injury claims by delivering compensation at proportionate cost.
The benefits of keeping a claim in the portal are low fixed recoverable costs. For claims valued between £1,000 and £25,000 that fall out of the portal – through missing information, timescales not being met or denied liability, for instance – there are still fixed costs but these are substantially more expensive than those inside the portal if the case proceeds to litigation.
What brokers need to know about the motor portal process
- All motor bodily injury claims – valued between £1,000 and £25,000 – are dealt with via an electronic portal, which now also deals with all employers’, public and product liability claims of the same value.
- Under the new rules there has been an increase of 10% in general damages (pain, suffering and loss of amenity) to balance the non-recoverability of success fees from the paying party.
- As soon as a claim is notified, claim notification forms (CNF) must be acknowledged electronically within 24 hours.
- From receipt of the CNF, liability decisions must be made within 15 business days for motor.
- Once a full admission of liability has been made and the claimant has provided full details of the damages claimed, there is a period of 35 business days in which to negotiate settlement.
- Any arguments of contributory negligence or denial of liability will automatically exit the claim from the portal
“The costs are much reduced and between 60%-70% of our claims are being dealt with and retained in the portal process,” said Ray Fisher, Technical Claims Manager at Zurich.
The motor portal process, in operation since 2010, is part of the far-reaching LASPO reforms – which came into force in April 2013 to change the ‘no win, no fee’ culture by banning referral fees. This may have reduced legal costs, but a 10% increase in general damages was introduced under LASPO to assist claimants in meeting the additional risks and costs arising from all the measures
“Following the decision to uplift damages by 10%, if you look at portal data over the past 12 months there has actually been a 20% increase in damages and we have seen a further increase in 2014,” said Ray.
There were 74,700 new claims added to the portal in January – the sixth highest number of new monthly claims since the portal was born. The five higher months were all recorded in late 2012 and early 2013, when the LASPO and portal reforms were imminent.
However, January is just one month – especially as it is traditionally a busy period following the Christmas break – and since July 2013 a certain percentage of the figures will be new claims entering the system from the higher band. Before this point, the motor portal only accepted claims up to £10,000.
“Frequency of claims is reducing slightly,” said Ray. “There is no long-term evidence of anything other than a very slight drop in claims, despite the January numbers.”
It is probably a little early to definitively judge whether the extended portal process and LASPO reforms are making serious inroads into reducing fraudulent or exaggerated whiplash claims.
Independent medical panels
In October, the government backed down on increasing the limit – from £1,000 to £5,000 – for whiplash claims to be dealt with via the smalls claim track. Instead, the government is now pursuing the introduction of independent medical panels to ensure the reporting of these injuries is more robust, with a start date of July 2014 set for the initiative.
It is still unclear, though, how the panels are going to be paid for – with insurers likely to foot the bill.
“If the government says it is going to be operational by July, it will be done by July even though the finer details are still to be fully worked out,” said Ray.
“The key is having the medical agency and the doctor involved both completely independent of each other. And the doctor, who needs to be appropriately trained in medical legal work, must receive the accident circumstances from both parties.”
In the UK, around 75% of all personal injury claims involve whiplash, a position not mirrored in the rest of Europe. In France, for instance, the figure is less than 3%. Each whiplash compensation payout costs an average of £2,400, insurers say, with an additional £2,000 in legal costs.
According to the Association of British Insurers (ABI), whiplash claims cost insurers more than £2 billion each year and add more than £90 to the average car insurance premium.
“The process is working well. It is simple, transparent and everyone knows what they have to do. Claimant solicitors and insurers have taken to it and litigation is starting to reduce as more claims are dealt with on the portal”
Ray Fisher, Technical Claims Manager at Zurich
However, recent evidence from the ABI has found that motor premiums are reducing by around 9% a year because of the reforms.
“The process is working well,” said Ray. “It is simple, transparent and everyone knows what they have to do. Claimant solicitors and insurers have taken to it and litigation is starting to reduce as more claims are dealt with on the portal.”
However, a worrying trend is the increase of psychological treatment that is offered immediately following an accident and before a medical report is obtained. This is a behaviour that increases where the medical agency and rehabilitation company is directly owned by the claimant solicitors.