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Whiplash reforms – the challenges for insurers

We take a look at the whiplash reforms which are set to come into force in May 2021, based on known facts as they are today.

At the time of writing, the whiplash reforms are set to come into force in May 2021; no more specific date has been provided. Detail on the tariff figures and the rules sitting behind the new portal are to be made public ahead of that date but, for now, this update is based on known facts as they are today.

What are they?

The ‘whiplash reforms’ is an umbrella term for a number of reforms that have been, or are set to be, implemented with the effect of reducing the cost of motor insurance in the UK. Their collective aim is to reduce claim frequency and cost – both in terms of damages and costs.

The series of reforms set to come into force in May 2021 are:

  1. The increase in the Small Claims Track (SCT) limit for personal injury claims arising out of motor accidents from £1,000 to £5,000;
  2. The tariffing of whiplash injuries sustained by vehicle occupants [Part 1 of the Civil Liabilities Act 2018];
  3. The creation of an on-line portal for SCT value injury claims arising out of motor accidents (akin to the current RTA MoJ portal).

What do they mean in simple terms?

Three things:

  1. All those adult personal injury claims with an injury element worth between £1,000 and £5,000 will be allocated to the SCT if litigated, rather than the fast track (FT). Only the costs of issuing proceedings, some disbursements and the hearing fee are recoverable in the SCT.
  2. Compensation for whiplash injuries with a prognosis of under two years will be valued by reference to a fixed tariff and will attract much lower awards than the current JC Guideline assessments, so that whiplash claims which would previously have attracted awards of up to £7,000 will now be worth less than £5,000 (and so fall within the new SCT limit). The tariffing of whiplash injuries is designed to cause the most common type of injury claims arising out of road traffic accidents to change from being ‘costs recovering’ (FT) to ‘non-costs recovering’ (SCT).
  3. Such of those sub-£5,000 injury claims as qualify will be processed via a new on-line claims portal. Again, the aim is that the majority of the sub-£5,000 injury claims arising out of road traffic accidents will be processed through the new portal.

What do we know about the detail of the reforms?

Increasing the SCT limit is a simple and is self-explanatory concept.

A draft of the tariff for whiplash injuries was published in May 2018 and informed the industry that whiplash injuries which last less than two years will be assessed as having a value of between £225 to £3,725. The MoJ has indicated that those figures remain broadly accurate but will be altered slightly to allow for inflation etc.

The creation of a new process and portal for dealing with qualifying sub-£5,000 injury claims has proved time-consuming. The detail the industry is waiting on relates primarily to that.

So far we know that the new portal will only relate to claims arising out of motor accidents pursued by:

(a) Full capacity

(b) Adults, who were

(c) Occupants of a

(d) UK registered vehicle, following an accident

(e) Occurring within England and Wales

All other SCT value claims will proceed in the traditional manner.

Whilst the MoJ has never released progress reports setting out how the new process will actually work, through industry events and speeches by the architects of the new process we know that the broad process will likely be that claims will be presented to insurers by claimants or their lawyers via the portal. Then:

If liability is not admitted:

  1. The system will generate a claim form which will allow the claim to proceed to a SCT trial for a liability determination only
  2. If no liability attaches to the defendant, the process is exhausted
  3. If liability attaches to the defendant the system will proceed as below – as though liability had been admitted

If liability is admitted:

  1. The claimant will be medically assessed and settlement negotiations will ensue
  2. If settlement is reached, the process is exhausted
  3. If not, the claimant will be required to issue proceedings in order that the claim can proceed to a SCT quantum assessment at court

The process created therefore allows for a claim to proceed to two SCT trials/assessments; one on liability, one on quantum.

Challenges for insurers

The forecasted challenges for insurers are many and varied, including:

1. IT Infrastructure

Insurers have been working with the Motor Insurers’ Bureau for some considerable time, learning what technology they need in place to be able to access the new portal and process claims. It is assumed therefore that all insurers have the appropriate IT infrastructure in place. If not, act now.

2. Organisational structure

The great challenges for insurers are organisational and logistical. Post-May 2021, insurers will have a wholly new method of claims handling to manage so may need new team structures. From May 2021 claims can be categorised as:

Claim category Method of claims handling
Non-injury claims (<£10k) Traditional SCT
Adult injury claims (<£5k) (not qualifying) Traditional SCT
Child injury claims (<£1k) Traditional SCT
Adult injury claims (<£5k) (qualifying) (new) SCT Portal
Child injury claims (>£1k and <£25k) – liability admitted (existing) MoJ Portal
Adult injury claims (>£5k and <£25k) – liability admitted (existing) MoJ Portal
Child injury claims (>£1k and <£25k) – liability denied/out of Portal Traditional FT
Adult injury claims (>£5k and <£25k) – liability denied/out of Portal Traditional FT
All non-injury claims (>£10k and <£25k) Traditional FT
All MT value claims (>£25k) Traditional MT

Insurers therefore need to have teams operating on two portal platforms as well as in the traditional manner.

The pool of traditional SCT claims will increase in size to embrace those adult claims which become SCT due to the increase in the SCT limit but do not qualify for the new portal (yellow). Insurers will need to quickly gauge the size of the volume increase and be capable of resourcing it.

Handlers of new portal claims (red) will need to be capable of dealing with vehicle damage claims as well as injury, liability as well as quantum – unless the insurer delineates between initial liability disputes and later quantum assessments/disputes and is able to reallocate internally without friction or risk.

3. Preparing liability evidence

Insurers have, until now, provided questionnaires/completed claim forms to the other side in support of denials. The new system requires them to respond to a claim and prepare evidence in a manner which prepares the case for trial, as lawyers currently do. Ensuring completion of Statements of Truth will therefore become an insurer obligation.

4. Dispute v delay

Quantification seems likely to be put off whilst liability is unresolved. Delay to a court adjudication on liability could mean a claimant is not medically examined for months (perhaps years) after presenting a claim. That might mean lengthier prognoses. Partial denials would therefore seem to present an indemnity spend risk.

5. More routine concerns

It has long been considered that insurers face challenges from:

  1. Increased claim numbers (through ease of presentation/guaranteed figure for damages under the tariff)
  2. Fraud – identifying and dealing with it
  3. The value of tariff and non-tariff injuries
  4. Delay/inactivity

Weightmans will be running a series of event leading into the implementation of the reforms offering support to insurers as they face these challenges.

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