Intriguing statistics relating to reform of personal injury compensation claims

Many people in the media and the government today bemoan the growth of a “culture of compensation”. The notion that public finances are somehow drained by individuals claiming the compensation they deserve is bandied about at will but do the facts support this? It would appear not as two recently released sets of data demonstrate.

The first lot of statistics regard road traffic accident personal injury claims. It has been found that the amount that motorists in the UK pay on parking each year is four times the cost incurred by the entire insurance industry when dealing with personal injury compensation claims. Whilst the insurance industry only pays out £2bn each year, the public using Britain’s roads pay a shocking £8bn just to park. So all things considered, compensation claims are a minor expense.

The government has also been complaining about the legal fees of personal injury solicitors in compensation claims and seems to think that by dramatically cutting these, there will be more money in the public coffers. Under the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) the government will slash such fees in the expectation that up to £400m will be saved. They appear to have made some basic accountancy errors though. By cutting solicitors fees on compensation claim, the government will lose £200m in VAT revenue as well. This money will have to be made up somewhere, but where? Tax increases? Further cuts to public services? It is unlikely that the public would react well to such changes, so perhaps the government needs to reconsider its priorities.

Government Makes Life Difficult for Claims Managers

The Ministry of Justice (MoJ) is set to price a host of Claims Management Companies (CMCs) out of the regulation market through a 47% hike in application fees in 2013/2014 and the removal of the current cap on annual fees. Under the new proposals:

• CMCs will face a fee increase in the financial products and services sector

• The application fee will rise from £950 to £1,400

The MoJ which regulates CMCs is looking to replace the funding which will be lost through the ban on personal injury referral fees, due to come into effect in 2013. In a recently released consultation document, the MoJ stressed that the resources the changes are expected to generate will be vital for the protection of consumers and prosecution of “unauthorised traders”.

The document reveals a need to focus on malpractice within the financial products and services sector, to which 90% of all consumer complaints are now related.

The changes are also likely to see the Legal Ombudsman’s jurisdiction widen to incorporate complaints related to CMCs, at an estimated cost of £3m, explained by recruitment, training, IT and marketing expenses. The annual fees for complaint handling will be capped at £40,000 and calculated in relation to turnover.

The consultation period will continue until the 18th December and from the 1st April 2013, the new fees will come into force.

Let’s hope that the Minister of Justice show a bit more backbone in dealing with rogue CMC’s.

UK accident compensation claims – 10% uplift to general damages

Today saw confirmation from the Court of Appeal that with respect to all court judgements, which are made after April 1 next year, there will be an automatic uplift in compensation paid by way of general damages by 10%.

It is proposed that this increase should apply to all general damages granted in respect of nuisance, and other torts causing inconvenience, distress or suffering to anyone – but most importantly of all, the uplift also applies to general damages for pain, suffering and loss of amenity in accident conversation claims. The increase formed a key part of the recommendations of Lord Justice Jackson’s proposals for civil litigation reform.