Lawyers have been waiting anxiously for the Ministry of Justice’s consultation paper on its proposed whiplash reforms. Whilst this may seem a minor matter in light of national events, the paper will signal the start of a process that may have a greater impact upon the legal and claims sector than Brexit ever will, says Donna Scully.
The nation has been understandably gripped by the momentous political and economic events of the last few weeks.
With government treading water throughout the official referendum campaign, unable to make or publish significant policy decisions, we can expect the floodgates to open as the backlog of proposals, consultations and decisions is cleared over the coming weeks.
We may have a newly configured government, but I fear that the Ministry of Justice intends to plough on regardless with its chosen course to raise the small claims limit for personal injury claims.
The proof will be in the detail, of course, but there is a danger that the consultation will be about rubber-stamping the proposals set out by George Osborne in his autumn statement last year, rather than looking at whether this is actually a good approach in the first place.
We need an open and honest debate about what sort of system we wish to end up with. We should not be attempting to rush headlong down a path that is littered with dangers and potential pitfalls.
We have already come a long way in reforming the motor insurance system in the last few years – the MoJ Portal and fixed costs, further reduced fixed costs through LASPO including a ban on referral fees, the end of recovery of ATE premiums and success fees, and QOCS, AskCUEPI, ‘fundamental dishonesty’, and so on.
The raison d’ȇtre for the reforms has morphed into Lord Faulks and others questioning the basic right to seek recompense for injuries and the need for independent legal advice
It is very unfortunate that the government appears to have already chosen to proceed without properly assessing the success of these existing reforms, each designed to better tackle fraud, and some of which are still not yet fully implemented. Fraud is, rightly, an important issue across the sector, and we need tough action against those who abuse the system.
But it is profoundly more disturbing that the raison d’ȇtre for the reforms has morphed into Lord Faulks and others questioning the basic right to seek recompense for injuries and the need for independent legal advice. Condemning legitimate and reasonable claims as simply ‘unnecessary’ challenges one of the basic foundations of our centuries-old legal system.
I have always taken what I hope is a pragmatic approach to changes in the regulatory landscape. There are serious problems that cannot be ignored. We can argue until we are blue in the face about the scale of fraud, but it is a problem for everyone, and must be progressively tackled on many fronts. There are bad practices from solicitors and insurers alike that have the potential to encourage or perpetuate a culture where exaggerating or inflating a claim is somehow acceptable. We need strong enforcement of the existing regulatory framework to tackle the bad ‘enablers’, whether they be individuals or firms.
I have genuine concerns about the future if the MoJ continues down this path. A system that refuses to compensate for some types of legitimate claims, but not others, threatens the very principles of our insurance and justice system.
No matter what information is provided for claimants, in the absence of independent professional legal advice and representation, litigants in person will either struggle with the complexities of representing themselves, not seek compensation for their injuries at all, or be driven into the hands of claims management companies (CMCs).
I find the prospect of the advice gap being filled by CMCs and others truly terrifying. I strongly suspect that accident victims will continue to seek representation at the time that they need it most, and will be prepared to pay for it out of their damages. It might not happen overnight, but this would set us down the road of US-style contingency fees. Vulnerable people who won’t otherwise be able to afford legal representation will be forced down the contingency path.
After every previous regulatory change in the market, CMCs and others have recalibrated their business model, to be compliant amongst the better ones, or to find loopholes and workarounds for the rest. They adapt to and survive in an evolving regulatory landscape driven by greed and money, and not customer service.
I think we can be quite sure that they are already thinking about how they might exploit the system being proposed by the government. They will direct clients to use the Portal, or use it ‘as them’ on their behalf.
Do any of us really want the prospect of more cold calling? Surely that is the last thing intended by the MoJ, but that is probably going to be the result
CMCs are already preparing for a rise in the small claims limit by employing (or even worse, having self-employed) McKenzie friends to look after and represent accident victims following accidents, taking a huge cut of their damages for the privilege. There is nothing particularly ‘friendly’ about people with no experience, no professional indemnity insurance and, perhaps in some cases, few morals, representing you after an accident.
Claims are not just going to disappear. If anything, they could increase in value to mitigate contingency arrangements. Perversely, the number of claims might actually increase, together with the levels of fraud. And do any of us really want the prospect of more cold calling and more dubious marketing practices? Surely that is the last thing intended by the MoJ, but that is probably going to be the result.
There is a genuine debate to be had about what level the small claims limit should be set at. Should it be calculated on the basis of RPI or CPI? Is the proposed increase proportionate to the growth in damages since it was introduced? Do other associated costs need to be taken into account?
Unfortunately – and with the proviso that we have still not yet seen the detail of the consultation – it doesn’t look as if the MoJ is willing to engage in such a frank debate. This would be a real shame. Past cross-industry measures have shown that so much more can be achieved by an open dialogue and collaboration to find real solutions to tackle fraudulent and other unwelcome behaviour.
It may be too late to expect that the government will change its direction, but I for one will not stop arguing that there is a better, more constructive way to find solutions to the problems faced by our sector.
Donna Scully is a partner at Carpenters (@Donna_Scully).