The government’s proposed whiplash reform could lead to significant access to justice concerns, according to a Parliamentary committee report.
The proposals include raising the personal injury small claims limit from £1000 to £2000, and to £5000 for road traffic accidents.
Insurers say the changes will cut fraud and will lower premiums for honest motorists.
The Justice Committee has been examining the impact of the reforms, and found that – even with an electronic platform for small claims – the government could fall short of guaranteeing ‘unimpeded access to courts’.
Chair of the committee, Bob Neill MP, said: “Access to justice, including the right of access to the courts, is a cornerstone of the rule of law but these reforms risk putting that right in doubt.
“We share strong concerns that were raised during our inquiry on this issue, including concerns about the financial and procedural barriers that claimants might face.
“The Ministry of Justice has made some welcome moves to develop the electronic platform to compensate for claimants’ anticipated lack of legal representation. However, we remain to be convinced that this will be effective or sufficient.
“This is a vitally important point of principle on which the government should reflect. The small claims limit for personal injury should not be increased unless ministers can explain how it will make sure that access to justice is not affected.”
The committee said it agrees the small claims limit should rise in line with inflation to £1,500. However it said it is “deeply troubled” by the lack of clear numbers of insurance fraud. The report recommends that the government should not increase the small claims limit for RTA PI claims to £5,000.
The Committee said it was deeply unimpressed by the inability of the Ministry of Justice to quantify the impact of raising to £2,000 the small claims limit for employer liability and public liability claims; given the potential complexity of these claims and the role of litigation in maintaining safe and healthy workplaces, MPs recommend that they be subject to a small claims threshold of £1,500.
It urged the Financial Conduct Authority to monitor premiums to ensure that savings from reforms were passed on to consumers.
The legal sector welcomed the report. Andrew Twambley, spokesperson for Access to Justice, welcomed the report. He said: “The report is a devastating critique of the current approach, and calls out ministers for proceeding with their plans without any compelling evidence to justify their strategy.”
Qamar Anwar, managing director at First 4 Lawyers, added: “We strongly welcome the recommendations in the report, to set the small claims limit at £1,500 not the £5,000 proposed by the Ministry of Justice in the draft bill. We have long said that this creates serious access to justice concerns, and are heartened that this has been acknowledged by the Justice Select Committee.”
Insurers responded less favourably. Martin Milliner, director of claims at LV, said: “Indexing the small claims limit of £1,000 from 1999 is misplaced as it assumes that the world of whiplash has been frozen in time. The pervasiveness of claims management companies, the cold calling epidemic, alternative means to accessing justice and the industrialisation of the end to end value chain of a whiplash claim is irreconcilable to that of 1999. If the limit is not raised to £5,000, then the reforming nature of the Bill will be put at risk, leaving those who are riding the whiplash gravy train still partying like it’s 1999.”
James Dalton, director of general insurance policy at the Association of British Insurers, said: “The conclusions in today’s Justice Select Committee report on the Small Claims Track limit read like a shopping list of asks from the claimant lawyers. If accepted, these recommendations would achieve absolutely nothing in terms of reducing the number and cost of whiplash-style claims, would allow lawyers to continue to line their pockets and honest motorists would continue to pay higher car insurance premiums as a result. In addition to every £1 paid in compensation to claimants, claimant lawyers get nearly 50p.
“Access to the justice system is important and the fact remains that under the Civil Liability Bill, compensation for whiplash claims will be fixed and a portal is being developed to facilitate access for people to make a claim with the support and guidance they need to do so.”
The Committee also welcomed the reforms to the regulation of claims management companies in the Financial Guidance and Claims Act, and recommended the FCA impose a cap of no less than 20% on the proportion of compensation that CMCs can levy from PI claimants. It also recommended the government monitor the effectiveness of the Act’s restrictions on cold calling, and report back the Committee within a year of the restrictions taking effect on progress made in using technical remedies to tackle loopholes that might be exploited by overseas operators.
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