The government will unveil plans on Thursday to cut dramatically the amount that car crash victims can claim for whiplash injuries.
A consultation from the Ministry of Justice will say that Britain is in the grip of an “epidemic of whiplash claims” which is driving up the cost of car insurance. It says whiplash claims are 50 per cent higher than they were a decade ago, despite a fall in the number of accidents.
In response, it plans to either scrap the right to compensation or put a limit on the amount that people can claim. Capping compensation would, it says, push payouts for minor whiplash claims down from an average of £1,850 to a maximum of £425.
That would save insurers £1bn a year which, if passed on to customers, would cut annual car insurance premiums by about £40.
The government also plans to raise the maximum limit for personal injury claims in the small claims court from £1,000 to £5,000. That would push far more whiplash cases into the court, where legal fees have to met by the claimant rather than the insurer.
It’s little wonder that the UK is shamefully regarded as the whiplash capital of the world
The proposals would also force claimants to produce a medical report detailing their injuries.
Liz Truss, justice secretary, said that “for too long” some have seen whiplash claims as “an easy payday, driving up costs for millions of law-abiding motorists. These reforms will crack down on minor, exaggerated and fraudulent claims”.
According to Michael Lloyd, the AA’s director of insurance, more than 800,000 small injury claims were registered through the Ministry of Justice small claims track last year, of which 750,000 were estimated to be whiplash injury claims. “It’s little wonder that the UK is shamefully regarded as the whiplash capital of the world,” he said.
In the meantime, motor insurance premiums have risen by 16 per cent according to the AA. Insurers say whiplash costs are partly responsible for the rise, after the last set of reforms in 2013 failed to deliver the expected benefits.
The industry has promised to pass savings from the latest reforms on to policyholders.
Mark Wilson, chief executive of Aviva, said: “Fraud is not a victimless crime and law-abiding motorists have paid for the UK’s dysfunctional and fraudulent motor claims system through inflated motor premiums for too long. Let me be clear: Aviva will pass on 100 per cent of the savings to our customers.”
However, the reforms will not be welcomed everywhere. “The news to proceed with the reforms to crackdown on whiplash claims will come as a significant boost to many insurers and a severe blow to many in the claimant market,” said Ian Davies, partner at law firm Kennedy’s. “The boundaries of the consultation appear to go further than previously proposed.
“We anticipate an outcry from those who deal with injury claims outside of whiplash … who will be affected by the proposal to increase the small claims limit for all personal injury claims,” he added.