SPONSOR SEGMENT – WHIPLASH REFORMS

Thursday 28 January 2021

Reduced damages for whiplash type injuries and an increase in the small claims track limit for personal injury from road traffic accidents (to £5,000) are due to be implemented in May.

Changes published in the Government’s whiplash reform plan also include a new litigant in person (LIP) portal.

The new tariffs for whiplash injuries reduce current awards by between 47% and 90%. It essentially removes solicitors’ involvement from standard whiplash claims.

One of the implied benefits is that the changes will lead to a significant reduction in fraudulent claims. However, insurance claims fraud is not going away, no matter how much legislation is thrown at the problem.

Similar Ministry of Justice (MOJ) assertions were made following the introduction of the portal for low value road traffic personal injury claims in 2010. In the years following many insurers reported an increase in fraud. Although the claimant lobby strongly refutes this trend.

Spurious low-end whiplash type injuries may well shrink as a consequence of new changes, but could these be replaced by a new wave of injury fraud?

There is an expectation that less common injuries, (like tinnitus, knee and wrist injuries) will increase as they are not included in the new tariffs. Further speculation is for a sharp rise of psychiatric injury and post-traumatic stress disorder claims.

More sinister, organised, criminal behaviour, such as induced or staged road traffic accidents may remain at current levels, with the claims focus shifting from personal injury to expensive and exaggerated bent metal and credit hire claims. Coincidently this is an area that attracts hourly rate costs for litigation.

Those injured while on motorcycles are also not included in the LIP portal. We already see a rise in these claims, although admittedly they do not lend themselves to fraud as easily as incidents involving cars.

Employers’ and public liability claims are not subject to the reforms, and there is expected drift from suspicious road traffic accidents into dishonest employers’ and public liability claims. The latest statistics from the Association of British Insurers (ABI) show that in 2018 the industry uncovered 19,000 employers’ and public liability fraud claims.

The small track limit is rising to a paltry £2,000 for personal injury claims, which is unlikely to be a prohibitor, as the value of such claims nearly always exceeds this.

ABI figures for 2018 show there were 58,000 fraudulent motor claims, showing a steady increase over a decade, with 75% involving personal injury. However we expect detected motor fraud to reduce, with a lower proportion involving personal injury, while employers’ and public liability claims to increase. It will be interesting to see if the overall total will remain stable.

Public bodies and fraudulent claims

Public bodies have the unenviable duty of protecting the public purse, which includes defeating dishonest claims and avoiding fraud leakage. However great the effort on fraud prevention and detection, the challenges posed by the pandemic may mean public bodies are now viewed as an easy target.

Public bodies also have the extra pressure of arguably being held to a higher standard of claimant treatment than the private sector.

It is an opportune time to revisit and refresh fraud detection knowledge, mechanisms and tools, and we recommend:

  • Extra scrutiny of cases where the loss seems disproportionate to the incident.
  • A focus on fraud detection between both motor injury claims to employers, and public liability injury claims.
  • Attention to the book of claims data. Investigate any increase in vehicle damage and credit hire claims, or employers’ and public liability claims.
  • Look for patterns in claims to detect organised rings, in particular employers’ and public liability cases.
  • Use data mining and intelligence.
  • Remain vigilant.

Gary Petterson (gary.petterson@plexuslaw.co.uk) is Partner and Head of Fraud Services at Plexus Law. He has over 13 years’ experience in acting for insurer and corporate clients in defending fraudulent or exaggerated claims.

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