Post blog: The year reform hit the road

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The reform of the personal injury system may not be as significant as the major events of 2011, such as the Arab Spring, Eurozone crisis or death of Osama bin Laden, it will have a dramatic impact on all those involved in the system.

In March, the government announced that Lord Justice Jackson's recommendation for reform of Civil Litigation should not merely be a litany of aspirational ideals and laudable goals but the framework of change to the PI system. In record time the bulk of his recommendations were transcribed into the Legal Aid, Sentencing and Punishment of Offenders Bill and introduced into the House of Commons in June.

The government initially chose to overlook Jackson's recommendations to ban the controversial charges paid by solicitors to insurers and others for obtaining personal injury cases. Blame, they said, lay at the door of the Legal Services Board, which had, in May, recommended that a ban should not be included in the Bill.

The reaction to the government's blind-spot on the referral fee issue sparked an increased pressure to see the practice banned. Many, such as former Home Secretary and Justice Minister, Jack Straw MP and the Association of British Insurers came belatedly to campaign on the issue.

There was a perceptible change in the ABI position following evidence received by the parliamentary Transport Select Committee of insurer engagement in the receipt of referral fees, and arguably their impact on inflation in those fees.

Straw was apparently unaware of the activity of insurers whilst in charge at the MoJ. Various misaligned commercial incentives have proliferated alongside referral fees. By June, the issue was front and centre with the majority of the media. Straw had joined the campaign and in September and introduced a motion in the Commons calling for a ban.

By November, the government had responded to the outcry by tabling an amendment to the Laspo Bill which banned referral fees. The amendment passed with ease; unfortunately it is intrinsically ambiguous. To ban solicitors paying referral fees without also tackling the welter of other referral fee payments from medico-legal reporting to credit hire will paradoxically simply divert referral activity to these practices, and make matters far worse!

Equally, alternative business structures may allow even more unscrupulous practices to develop, given that there are no specific proposals to deal with legitimate concerns which arise from claims management and insurance companies being granted licences to own solicitors practices.

Assuming the Laspo Bill passes without any further notable amendments, the debate on how to complete the reform of PI will continue long into the New Year. The new battleground is likely to be over fixed fees in relation to the RTA portal as well as an agreed definition on whiplash and an attempt to reach consensus as to how it should be treated. More clarity is also needed on what constitutes a promotion which crosses the line by inciting the public to litigate.

There is still a long road to travel and a number of arguments that need to be won before we can all say that the PI system works in the best interests of the public. For my part I will continue to campaign for reform that protects injured people and road accident victims and consumers alike.

Irrespective of the ultimate conclusion of these debates, we can surely agree that 2011 has heralded some dramatic steps towards fundamentally changing the PI system. If 2011 was the year reform finally hit the road, 2012 may be the year it reaches full speed. The fear remains that the continued lack of a holistic approach will lead to retrograde rather than positive reformation.

The government's steps have in practice consistently failed to initiate change which tackles the real problems. The Laspo was targeted to deal with a perceived compensation culture, but potentially promotes bringing speculative claims with impunity.

It also creates real access to justice denial issues particularly for the most seriously injured, as well as others, and reduces compensation again principally for those most seriously injured who deserve most, not least, protection.

The nascent plans for a referral fee ban may inadvertently drive the generation of more not less profiteering and claims proliferation through the only open commercial doors being those likely to lead to the promotion not reduction of those activities.

How do we avoid all this? By starting to look holistically and honestly at the systemic failures in each portion of the PI market, and creating a series of interlocking reforms to address each aspect.

John Spencer is director of Spencers Solicitors

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