Ellman: better data is key
The government’s personal injury reforms appears more likely to put genuine claimants at the risk of injustice than reduce the number of fraudulent claims, an influential group of MPs has warned.
The MPs also said there was “little direct evidence that tackling fraud has reduced premiums”, and called for more time for the impact of previous reforms to be felt.
The comments came in a letter to justice minister Lord Keen from Louise Ellman, chair of the transport select committee, dated just after the consultation closed in January. The outcome was announced [1] last week.
Ms Ellman, who was writing at the request of the committee, said that while the proposals “could help to depress the number of claims overall”, they were not specifically targeted at fraudulent claims.
Previous recommendations by the committee focused on raising the bar for successful claims and was concerned to ensure that genuine claimants were not penalised.
“Your current proposals seek to reduce the incentives to claim. The government should demonstrate how the proposals to reduce levels of compensation will deter fraudulent claims while allowing those with a genuine claim to get appropriate restitution.”
The Labour MP said better data on claims, and more information and data sharing, was key. “If the government is to press ahead with these proposals, it must make sure that it has a means of measuring the effect of the reforms so that it can show that its policies are delivering their intended benefits.”
“Overall I would prefer to see the government place more emphasis on measures that make it harder for fraudulent claims to succeed. It would be a poor outcome and represent an injustice for genuine claimants if the overall level of claims fell but the proportion of fraudulent claims rose.”
Ms Ellman also expressed concern that the reforms would open the door to claims management companies, and questioned why the government was planning to ban cold calling in relation to pensions but not whiplash claims.
“The process of managing a claim through the small claims process, even with a McKenzie Friend, will be a daunting prospect for many motorists. Many will not know where to start and unscrupulous claims management companies may see this as an opportunity.
“This could undermine the efforts that have been made previously to clamp down on such companies. It could even end up working against the proposals for a reduced tariff if such companies are able to encourage even minor claims in return for a share of any award.
“Even very small awards might allow them to make a profit if they can encourage enough claims. The government must demonstrate how its reforms will not be open to such abuse.”
Ms Ellman said she was concerned that the proposals would simply see fraudulent claims displaced to other parts of the claims chain, such as rehabilitation, repairs and credit hire.
She continued: “The proposals could have an effect on the management of claims arising from road traffic accidents (RTAs) where there is no injury. Motorists with such claims benefit currently from the arrangements insurers have with solicitors.
“If legal representation is removed, these motorists may find that they too have to manage their own claims.”
The MP said there had not been enough time to evaluate the effect of the reforms of recent years. “In particular I would like to see more of the recommendations from the Insurance Fraud Taskforce implemented. There should be a proper evaluation of the reforms to date and further reform only if it can be shown that previous reforms have not delivered.”
She observed that despite the claims that the proposals would reslt in a reduction in insurance premiums, “there is little direct evidence that tackling fraud has reduced premiums”.
Ms Ellman said: “The recent increase in insurance premium tax may well offset any future fall arising from efforts to tackle fraud. At best the government should probably be claiming that it has stopped claims rising as fast as they otherwise would have rather than raising expectations about lower premiums.”
Lord Keen wrote to Ms Ellman on 23 February to highlight publication of the consultation response, but did not respond to any of the points raised in her letter.
He concluded: “The government is committed to removing the burden of excessive costs on consumers, and believes that these reforms will reduce legal costs and generate significant savings.
“The government fully expects insurers to pass on the savings from these reforms to consumers through lower premiums, and we will be monitoring the industry’s reaction to these reforms. The government will consider further action to make sure the savings are passed on if such action is required.”