The government is keen to introduce yet more reforms to the personal injury industry, and especially with regards to compensation claims following whiplash injuries. It is claimed that these cases cost the insurance industry £2bn a year, and some experts have said that the majority of claims must be fraudulent.
The government has introduced reforms previously, and they are discussing further reforms which they not only hope will reduce the final bill to insurers, but would also lead to savings for drivers themselves, as insurance companies pass the savings on to drivers. However, analysts have said that they expect insurers to take longer to pass savings on this time, because many feel that they overestimated the financial benefits that the previous reforms would bring and were left out of pocket, as a result.
Whiplash is a form of soft tissue damage, and it can be very difficult to prove or disprove that a person has suffered from it following an accident. What’s more, because most whiplash claims are relatively small, it means that many insurers pay out rather than contest the claim, because it works out less expensive in the long run. The ease with which whiplash claims can be successfully submitted has led, according to some experts, to a rash of fraudulent claimants submitting compensation claims for hundreds or even thousands of pounds for injuries that they do not really have.
Previous reforms included the scrapping of referral fees and, in anticipation of those changes, insurers reduced premiums by as much as 25% or even 30%. Ultimately, however, they did not make savings of this kind of value, and so not only did premiums sneak back up, but insurers felt that they had been left out of pocket as a result.
According to the new changes, the maximum compensation amount that can be dealt with in small claims court has been increased from £1,000 to £5,000, while the government is also considering scrapping cash compensation altogether for the smallest claims. They have said that they hope the changes will lead to £1bn of savings to the insurance industry, and that drivers will ultimately enjoy £50 a year lower premiums, on average.