Ministry of Justice announces plan to tackle ‘toxic’ compensation culture by making it much tougher to win payouts



Millions of motorists could see their car insurance bills cut by £40 a year, the government says, after it announced a crackdown on the “epidemic” of exaggerated and fraudulent whiplash injury claims.

The Ministry of Justice (MoJ) proposals would make obtaining a payout much tougher and, according to insurers, will end the UK’s status as the whiplash capital of the world. The proposals are intended to stamp out a “toxic” compensation culture that has pushed up motor premiums, led to consumers being bombarded with nuisance text messages and calls, and put additional pressure on the NHS.

The MoJ has proposed either scrapping the right to compensation for minor whiplash injuries or putting a cap on the amount people can claim. It said capping compensation would see the average payout cut from £1,850 to a maximum of £425, with this money only paid out where a medical report was provided as proof of injury.



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One whiplash claim is paid out every 60 seconds, and the number has soared 50% in a decade, despite the UK having some of the safest roads in Europe and a fall in the number of accidents, according to the government. The AA said it was “shocking” that, of more than 800,000 small injury claims registered through the MoJ last year, an estimated 750,000 related to whiplash.



The easy access to motor injury compensation has also seen the rise of “crash for cash” scams, where criminal gangs submit false claims in relation to car accidents that were either staged – thereby putting innocent motorists at risk of harm – or never happened.



Earlier this year, Britain’s biggest insurer, Aviva, said whiplash was costing motorists £2.5bn a year, adding £93 to the average motor insurance premium.



A clampdown was signalled by George Osborne in his 2015 autumn statement, but last month it was reported that the planned reforms had been delayed or shelved. The insurance industry was therefore relieved to see the MoJ announce its consultation on tacking the “unacceptable” situation.



Another key government proposal would curb excessive legal costs by effectively removing lawyers from the process in many cases. It would do this by raising the upper limit for all personal injury claims to be heard in the small claims court from £1,000 to £5,000. This is significant because, typically, legal costs in the small claims court are not recoverable.

Aviva has said nine out of 10 of the motor injury claims it received were for between £1,000 and £5,000.



However, this change is likely to prompt anger in some quarters because it will also affect injury claims unconnected to whiplash - such as claims for workplace accidents.



Other proposed measures include:



• Introducing a transparent tariff system of compensation payments for claims with more significant injuries.



• Banning offers to settle claims without medical evidence. All claims would need a report from a MedCo-accredited medical expert before any payout was made. MedCo is the body charged by the government with overseeing the production of independent medical reports in whiplash claims.



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The MoJ said the problems had been fuelled by a predatory claims industry that encouraged minor, exaggerated and bogus claims. Elizabeth Truss, the justice secretary, said: “For too long, some have exploited a rampant compensation culture and seen whiplash claims as an easy payday, driving up costs for millions of law-abiding motorists.”



Many leading insurers have already pledged to pass on 100% of the savings from the reforms to their customers.



LV=, one of the insurers welcoming the proposals, said its own research suggested each Briton received an average of 468 nuisance calls and text messages every year. It also estimated that, between them, the country’s GPs saw 116,000 people every month that they suspected were inventing or exaggerating an injury in order to claim compensation.



Not everyone welcomed the clampdown, however. Law firm Thompsons Solicitors said: “Despite government figures showing that the number of injury claims are down, they have allowed themselves to be bullied by insurers into reviving hugely unfair plans to remove access to justice for the injured, without producing a shred of evidence to justify them.”

