Likely legal changes in the way small personal injury claims are treated will have far-reaching implications for risk managers, according to Terry Renouf, partner at BLM.
There has been a flurry of announcements and initiatives that all go to issues that surround the the “compensation culture”. The Insurance Fraud Task Force in January and the Brady Review of Claims Management Regulation followed the Autumn Statement, which saw the announcement of an end to general damages for minor whiplash claims and an increase in the Small Claims Track (“SCT”) limit from £1,000 to £5,000 for injury claims. Government data confirms 190,000 EL /PL claims registered with the CRU, the vast majority of which will be affected by SCT reform. What could be the unexpected consequences and impact on claims experience and the risk management issues?
SCT change is unlikely before April 2017. Although it does not need primary legislation to implement. Civil Procedure Rule change is necessary and these take place each year in April and October. Given the delays caused by the EU referendum and the government’s desire to link the SCT changes with whiplash reform it is certainly too late for October 2016 amendment.
However, as with previous civil justice reforms, we can predict that there will be a surge in activity in early 2017 before the rule change as lawyers try to minimise the impact on revenue streams as cases move from the fixed recoverable costs environment to SCT.
Claimant funding models will have to change and Damages Based Agreements will become more attractive (itself another policy area the Government is considering). Economically, claimants, mindful of their net damages recovered, could choose to represent themselves – should they feel confident that they can present and assess their own cases – or through necessity if the supply of legal services for SCT cases diminishes. Alternatively, the access to justice gap could be filled by claims management organisations who have been adept at filling these market voids.
At the SCT / Fast Track margins the boundaries will be tested by all parties, anxious to ensure the best outcome for their clients, and the boundaries will not just be around the financial limits. There will be exceptions – for instance “infants” where the Courts have always been determined to afford judicial oversight and protection. A consultation will no doubt consider where the exceptions should lie, whether they should be extended and the appropriate tests to apply.
Angela Doran, Claims Focus Group Chair for Airmic provides a risk manager’s perspective in which she asks members to consider the potential unforeseen consequences of The SCT on risk profiling and claimant models.
When deciding whether the SCT change is right for you and whether you wish to participate in the consultation, various issues may need consideration:
Consultation is expected on all of the above issues and will need a careful and considered response given the many linkages and issues. However, to keep reform “on track” for 2017 it is anticipated that the usual consultation periods may be shortened. Airmic members should be ready for a busy summer.
Terry Renouf - BLM