UK Personal Injury Litigation 2016; The turbulent course of market-changing reform continues

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The personal injury sector continues its turbulent course of market-changing reform, with legislative, legal, and regulatory forces at work. While the market was just beginning to settle post-Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), the game-changing reforms announced by the government in November 2015 have once again whipped up a storm of uncertainty.


• Sharp declines were finally seen in employers’ liability and public liability claims recorded in 2015–16, reflecting the start of a decline in noise-induced hearing loss claims, and, for public liability, a return to pre-LASPO levels.

• While a more stable picture in claims recorded will be welcomed by the insurance industry, the LASPO spike is still taking its toll on profitability. Settled claims remain significantly above pre-LASPO levels.

• Reforms could have a potentially cataclysmic impact on the claimant sector. They will crystallize the trends of consolidation and revenue diversification already in evidence.

• The result is likely to be a small number of larger claimant representatives guiding consumers through the small claims track, and providing additional services such as rehabilitation.

Reasons to Buy

Review your strategy against both the existing and new challenges regarding the personal injury claims market, as well as mooted solutions.

Benchmark against the market's experience of personal injury claims frequency and costs.

Slater & Gordon
Direct Line Group

Table of Contents


The turbulent course of market-changing reform continues

A post-LASPO landscape is emerging, three years after implementation

Proposed government reforms would have a game-changing impact

Claimant representatives are facing further radical structural change

The next 12 months will be pivotal


The personal injury sector has had a turbulent 15 months

The post-LASPO landscape is emerging

Claims numbers are falling following a surge in the build-up to LASPO

Claims numbers have yet to drop significantly below pre-LASPO levels

LASPO created a shift in personal injury claims that has yet to fully play out

The focus of claimant representatives away from motor led to sharp increases in EL and clinical negligence claims

Return to growth for motor claims in 2015-16, while EL and PL claims fall

LASPO has had a mixed impact on the market

The banning of referral fees is felt to have had little impact

Civil justice reforms have reduced costs

The impact of cost reduction on the ability of claimant representatives to take forward EL and PL claims is unclear

Proposed government reforms would have a game-changing impact on the sector

Proposals would increase the small claims track limit and remove general damages for minor soft tissue injuries

Key questions and uncertainty remain about the coverage of incoming reform

Political issues and the contentious nature of the reforms add to the uncertainty

Stark differences of opinion exist, although reforms are likely to be watered down

The reforms will reportedly save motor insurers an estimated £1bn a year

Announced reforms could have a wide-ranging impact

The reforms may have unintended consequences

Restructure of market participants: CMCs are likely to capture a greater share of the market

Claims inflation could be an unintended consequence of the reforms

Access to justice could fall to contentious levels

The market may see a spike in claims numbers following any reforms

Changes may push increased claims in other areas

Raising the small claims track limit: "old wine in new bottles" vs. market-changing impact

Removing general damages: the real game-changer

The CMC sector is facing further radical structural change

There was a sharp decline in CMCs post-LASPO

Before the end of 2015 the market was showing signs of stabilizing

Uncertainties surrounding the Autumn Budget reforms and future regulation have thrown the sector back into turmoil

The future for CMCs: contraction, diversification, and more regulation

Consolidation and diversification will increase

Revenue diversification will be key to survival

CMCs need to prepare for transfer of regulation to the FCA

Current regulatory priorities could have a more immediate impact on the sector

Tackling nuisance calls and unsolicited marketing would have a huge impact on the number of leads

Monitoring referral fee ban compliance will be complemented with the SRA's review

Tackling unauthorized activity, which may increase due to regulatory changes

Personal injury solicitors must prepare for tighter costs and a shifting landscape

Consolidation and contraction will result from the need for scale and efficiency

Fixed fees have led to a significant contraction in income

The need for scale and efficiency will segment the market

Slater & Gordon and Parabis provide insight into the issues of cost reduction and the likely future structure of the market

Significant restructuring is anticipated

The future of insurance company ABSs has been called into question

The SRA is likely to take more robust action and be handed greater fining powers

Fixed recoverable costs are likely to expand

The government expects urgent action on the Insurance Fraud Taskforce's recommendations

The Insurance Fraud Taskforce's final report was published in January 2016

The government accepts all the recommendations of the report and expects urgent action

The announcement of planned reforms overshadowed some of the work of the taskforce

Future claims trends: clinical negligence remains an area of concern

Clinical negligence claims have increased substantially since LASPO

Clinical negligence claims are estimated to have cost the NHS £1.4bn

Claims are expected to continue to rise, although the fixed fee regime may deter non-specialists

No other areas have yet risen to become the next NIHL or clinical negligence


Motor personal injury claims have increased as the market has adjusted to LASPO

Motor personal injury claims rose for the first time in four years

There are signs the market has adjusted and stabilized

Claims settled still remain significantly above pre-LASPO levels

RTA casualties continue to fall, remaining at odds with claims numbers

Whiplash and fraudulent claims remain thorny issues for motor insurers, continuing to drive claims numbers

Whiplash claims account for up to 70% of motor personal injury claims numbers

Fraud remains a significant problem

Claims inflation has a greater impact on larger claims, but legal changes and reforms will drive increases at the smaller end

Claims inflation is rising at 11% a year for larger claims

Claims inflation for lower-value RTAs is more stable

Factors affecting future claims inflation

MedCo has had a bumpy start and faces a potentially uncertain future

MedCo was set up in April 2015 to improve medico-legal reporting for whiplash claims

The early review of MedCo sought to tackle the issue of MROs gaming the system

MedCo's future will depend on the government's proposed personal injury reforms

Proposed government reforms would affect motor insurance profitability

Any policy shift on general damages or small claims track would have a significant impact

The increase in the small claims track limit could affect 70-80% of motor personal injury claims

Legal costs could be reduced by up to 50%

Reforms could save up to 20% of personal injury claims costs

Savings of £40-50 a year are impossible without the removal of general damages

While reforms may lead to significant cost savings, they cannot be viewed in isolation

Premium rates have already returned to pre-LASPO levels

A surge in claims numbers in the build-up to any reforms could lead to levels higher than the pre-LASPO peak

Claims costs are likely to increase in other areas as a result of the reforms

The next 12 months will be a pivotal time for motor insurers

In the longer-term personal injury will be affected by vehicle technology, telematics, and driverless cars


EL claims are finally decreasing

Disease claims continue to distort the picture, but claims have fallen in both sectors of EL

Although disease claims recorded are falling, NIHL continues to take its toll

Disease claims recorded peaked in 2013-14, driven by NIHL

The NIHL cash cow could be put out to pasture

Asbestosis and mesothelioma cases are largely stable and have not impacted claims numbers

NIHL continues to take its toll; claims settled are still sharply rising and recorded claims remain significantly above pre-LASPO levels

Accident claims are the only area to have fallen below pre-LASPO levels

Accident claims have dropped significantly since 2011-12

Injuries to employees, the underlying driver of EL accident claims, are in long-term decline

The Claims Portal is having limited success, particularly for disease claims, leading to calls for reform

Only 20% of disease claims are estimated to meet portal criteria

4% of disease claims and 12% of accident claims notified have been settled within the portal

Costs for the Diffuse Mesothelioma Payment Scheme will be impacted by claims inflation, not frequency

The scheme is expected to cost 28% more to run in 2015-16

While the value of awards is increasing, applications to the scheme appear to be flattening

Future issues for EL

The Mesothelioma (Amendment) Bill could place a further levy on EL insurers

Psychological and chronic back pain claims are yet to have any real impact

Wherever government reform lines are drawn, a seismic impact will be felt in EL


Abbreviations and acronyms


Claims Portal





Further reading

About Verdict Financial



Table 1: Number of personal injury claims recorded and settled, by type, 2010-16

Table 2: Number and turnover of authorized personal injury CMCs, 2010-15

Table 3: Number of motor personal injury claims recorded and settled, 2010-16

Table 4: RTA casualties and motor traffic in Great Britain, 2005-14

Table 5: ABI average quarterly motor insurance premium, Q1 2012-Q1 2016

Table 6: Number of EL claims recorded, split by accident and disease, 2010-16

Table 7: Number of EL claims recorded and settled, 2010-16

Table 8: Number of EL claims recorded and settled, split by accident and disease, 2012-16

Table 9: Employer-reported fatal and non-fatal injuries to employees, 2010-15


Figure 1: Important events in the personal injury market since 2015

Figure 2: Claims settled remain significantly above pre-LASPO levels

Figure 3: Motor claims maintain the lion's share of total cases

Figure 4: LASPO created a surge in non-motor claims

Figure 5: The potential impact of government reforms

Figure 6: While the number of personal injury CMCs has continued to fall, turnover increased in 2014-15

Figure 7: Current and future state of the CMC sector

Figure 8: Current priorities of the CMR

Figure 9: Clinical negligence claims have increased substantially since LASPO

Figure 10: A more stable LASPO landscape is emerging in motor personal injury, although claims settled remain significantly above pre-LASPO levels

Figure 11: Motor personal injury claims remain at odds with trends in RTA casualty data

Figure 12: Reforms would affect a significant proportion of motor claims

Figure 13: Claims costing up to £13,000 add £47 to the cost of an average policy

Figure 14: Premium rates have returned to levels seen pre-LASPO implementation

Figure 15: The rise and fall of disease claims recorded has dominated the EL sector

Figure 16: While EL disease claims recorded fell in 2015-16, claims settled continue to rise sharply

Figure 17: EL accident claims are significantly below pre-LASPO levels

Figure 18: Injuries to employees are in long-term decline

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