Conclusions and recommendations

Reforms to personal injury claim processes

1.Whether or not the number of RTA PI claims—in particular for soft tissue injuries—is reasonable falls outside the scope of this inquiry and so we draw no conclusion on this question, save to note the marked divergence between the views of the insurance and claimant sectors and the problems of quantification owing to difficulties in the medical assessment of whiplash. We also note the fall in the overall number of motor liability claims in the past few years. (Paragraph 20)

2.We endorse the steps taken by the Government and the insurance industry to tackle insurance fraud. Nonetheless we are troubled by the absence of reliable data on fraudulent claims and we find surprising the wide definition of suspected fraud that is used to collate the ABI’s statistics. In particular, the failure by the ABI to break down their figures by the nature and type of claim, and to isolate RTA PI claims broken down by type of road user, is a significant and regrettable omission that weakens their evidence base. We recommend that, in the interests of accuracy, the Government work with the ABI to develop a more nuanced approach to avoid conflating innocent—if unexpected—consumer behaviour with fraudulent activity. (Paragraph 30)

3.Potential savings to motor insurance customers are central to the policy justification for these reforms, but we conclude that the Government’s estimate of the pass-through rate may be over-optimistic, given the lack of robust evidence and the unenforceable nature of insurers’ promises to reduce premiums. We recommend that, if the reforms are implemented, the Government work with the ABI and either the Prudential Regulation Authority or the Financial Conduct Authority to monitor the extent to which any premium reductions can be attributed to these measures and report back to us after 12 months. (Paragraph 42)

Setting the small claims limit

4.We agree that the small claims limit for PI should be increased to reflect inflation. We recommend that April 1999 be used as the starting point for calculations, this being the date of the most recent adjustment to the limit, and that CPI—now the Government’s preferred measure—should be used to calculate inflation; our calculations suggest that an inflationary increase to March 2018 would be in the region of £1,454, indicating that £1,500 might be appropriate in April 2019. (Paragraph 47)

The impact of raising the small claims limit

5.We received compelling evidence of the obstacles that would be faced by self-represented claimants navigating the current personal injury claims process in the Small Claims track, regardless of the value of their claim, and we conclude that this would represent an unacceptable barrier to access to justice. (Paragraph 65)

6.While fraudulent and exaggerated claims must be prevented, given that the common law right to compensation for negligence applies regardless of the value of the claim, we conclude that more convincing justification is needed for the Government’s policy of reducing a large proportion of claims, including for non-whiplash RTA injuries, by means of raising the small claims limit, simply because the claims are minor. We recommend that the Government does not proceed with plans to increase the limit for all RTA PI claims to £5,000. (Paragraph 66)

7.Taking into account the evidence submitted to this inquiry and to that of our predecessor, we conclude that there is no policy justification for including vulnerable road users within the reforms proposed for other RTA PI claimants. We recommend that vulnerable road users be excluded from any higher small claims limit that is imposed on other RTA PI claims. (Paragraph 72)

8.We are deeply unimpressed by the Ministry of Justice’s inability to quantify the potential impact of raising to £2,000 the small claims limit for employer liability and public liability claims. Given the potential complexity of these claims for self-represented claimants and evidence of the role of litigation in maintaining safe and healthy workplaces, we recommend that they continue to be subject to the lowest small claims threshold—which we have recommended should be set at around £1,500 to take account of inflation since 1999. (Paragraph 81)

9.We welcome the decision to bring claims for holiday sickness within the fixed recoverable costs regime, as this would provide consistency with other PI claims. We recommend that the Government evaluate the impact of the new cost rules after 12 months and consider the evidence received in response to its recent consultation before consulting further on whether any additional action is needed to curb the number of fraudulent holiday sickness claims, to ensure that any proposed measures are proportionate to the problems that may remain. (Paragraph 85)

10.We conclude that the senior judiciary has reasonable concerns about the consequences for judges, and for the courts system, of increasing the small claims limit and we do not consider that “wait and see” is an adequate Government response to these concerns. If the small claims limit is to be increased by more than the rate of inflation, we recommend that the Ministry of Justice and HM Courts and Tribunal Service work with the senior judiciary to agree in advance a framework for monitoring the impact on the judiciary and the courts, so that monitoring can commence immediately after introduction of the new limit[s] and urgent steps taken to address any adverse impact identified.(Paragraph 91)

11.We further recommend that the Ministry of Justice ask the Civil Procedure Rule Committee to consider whether the Civil Procedure Rules need to be changed to facilitate applications by self-represented claimants on the Small Claims track to have their case transferred to the Fast track. (Paragraph 92)

Implementing the small claims reforms

12.We conclude that it was illogical for the Government to propose further reforms to the PI claims process before its review of Part 2 of the LASPO Act has considered the effectiveness of the earlier reforms. Before introducing further changes, we recommend that the Ministry of Justice consider the learning from its review of Part 2 of LASPO, once completed, to determine whether any adjustments should be made to the current package of reforms, including proposals for the small claims limit. (Paragraph 99)

13.We commend the decision of the Ministry of Justice to work with expert stakeholders in developing an electronic platform to handle the pre-action stages of lower value PI claims, and its commitment to piloting the new IT system that this platform will require. However, in the light of the evidence we received, we consider that the Ministry should take a more realistic approach to the technical challenges that may be faced in developing a fully functional electronic platform that has been properly tested with a wide range of users. We therefore recommend that the national roll-out of the new platform—and hence any changes to the small claims limit for PI claims—be delayed at least a further year until April 2020, and that the new claims process, including the support and guidance available to claimants, be subject to independent evaluation after three years. We conclude that the complexity of employer liability and public liability claims distinguishes them from RTA and that it is therefore not appropriate to bring them within the scope of the new online platform. (Paragraph 114)

14.We remain to be convinced that the electronic platform will be capable of overcoming the underlying inequality of arms between professionally represented insurers and self-represented claimants, particularly with regard to disputes on liability and quantum (the amount of compensation). Similarly, we conclude that the Government has not done enough to explain how claimants of limited means with legitimate claims are expected to finance court fees and expert reports. We therefore recommend that the Ministry give a central focus to these issues during the pilot phase of the project, both to secure financial help for claimants who cannot meet the cost of disbursements and to ensure that online decision trees give effective support to claimants pursuing valid claims in the face of defendant resistance. (Paragraph 115)

15.Notwithstanding the Ministry of Justice’s welcome commitment to overcoming digital exclusion, we remain concerned about the potential deterrent effect on particular population groups of introducing online-only applications, with the risk of introducing a discriminatory element into the pattern of claims. To avoid discriminatory impact, we recommend that the Ministry closely monitor the effect on different groups of claimants during the pilot phase of the electronic platform, and take steps to mitigate any adverse impacts that it identifies, for instance by providing targeted face-to-face support. (Paragraph 116)

16.We consider the availability of support and guidance, including face-to-face advice, is central to the success of the electronic platform for lower value PI claims and we welcome the Minister’s reassurance that this is the focus of a dedicated working group. The Ministry should commit to producing, as soon as practicably possible after the working group has reported, a stage by stage plan, with costings, for how it will fund and implement support and guidance to assist individuals to access the new platform, including any face-to-face support that the group recommends. This plan should be sent to us so that we can consider whether it meets the recommendations of the working group and the needs of users. (Paragraph 117)

Impact on organisations assisting claimants

17.We conclude that the Government has under-estimated both the role of BTE insurance in securing legal representation for PI claimants, and the impact of raising the small claims limit on BTE providers’ current business model, with potentially adverse consequences for access to justice. (Paragraph 126)

18.We welcome the reforms to the regulation of CMCs in the Financial Guidance and Claims Act, which will mitigate the risk of any unscrupulous activity on the part of CMCs if the small claims limit is changed. Evidence to our inquiry suggests that a cap on the proportion of compensation that CMCs can levy from a claimant in a PI claims is strongly desirable. We recommend that the Financial Conduct Authority impose a cap of no less than 20% and that this should be done as soon as possible after it assumes its new role as regulator of claims management services. (Paragraph 130)

19.We conclude that the Government’s current package of reforms creates a risk of increasing cold calling by, or on behalf of, CMCs; we welcome the restrictions on cold calling in the Financial Guidance and Claims Act, but believe they do not go far enough and that an outright ban should be introduced. In the meantime, we recommend that the Government monitor the effectiveness of the proposed restrictions, particularly on calls from overseas, and that technical remedies are urgently explored to tackle any loopholes that might be exploited by overseas operators to circumvent the restrictions; we ask that the Government report to us on progress with this within a year of the proposed restrictions being implemented. (Paragraph 133)

20.We conclude that, as a result of changing the small claims limit for PI claims, there is a real risk of paid McKenzie friends being used by CMCs to sidestep the regulatory requirements that apply to advocacy provided by members of the legal professions. We recommend that the senior judiciary seek to conclude its examination of this issue as soon as possible. (Paragraph 136)

21.We consider it regrettable that, at the consultation stage of these proposals, the Ministry of Justice concluded that it was not relevant to estimate the potentially substantial impact on the PI legal sector, particularly in the North West. It is also unclear to us why the Ministry’s final stage Impact Assessment has assumed that the sector will be able to replace PI legal work with work of equivalent value. While our inquiry did not focus on this issue, we nonetheless draw the Ministry’s attention to the impact of the reforms on the PI legal sector and the potential for this sector to replace PI work that it loses, both of which we consider to be important questions. (Paragraph 139)

Concluding remarks

22.We share concerns about the access to justice implications of increasing the small claims limit for PI, including the financial barriers that claimants might face. While we recognise the laudable efforts of the Ministry of Justice to develop an electronic platform supplemented by guidance and support to compensate for claimants’ anticipated lack of legal representation, we conclude that this ambitious project risks falling short of creating a claims process that guarantees “unimpeded access to the courts”, as indicated by the Supreme Court’s judgment in the Unison case. We consider this to be an important point of principle on which the Government should reflect; reform should not proceed unless the Government can explain how it will make sure that access to justice is not affected. (Paragraph 142)