Grayling: turned the tide on the compensation culture
The government announced over the weekend that it is to ban lawyers from “encouraging people to make claims” by offering them upfront incentives like cash or iPads.
It forms part of a new wave of reform in personal injury targeted at insurance fraud that will also require courts to throw out compensation applications “in full” where the claimant has been ‘fundamentally dishonest’.
The Ministry of Justice (MoJ) wrapped up the already flagged reforms to whiplash claims in its announcement – specifically a ban on insurers making pre-medical offers and the introduction of new independent medical panels.
The MoJ said that its actions to date had made a “major contribution” to the fall in motor insurance premiums over the past year, but cited recent figures from the Association of British Insurers that the number of dishonest motor claims increased by 34% to a record 59,900 in 2013, with a value of £811m.
It said the insurance industry had provided assurances that it will pass on any savings that result from these reforms “straight on to customers”.
Despite pressure from large numbers of personal injury lawyers, and the fact that the government banned claims management companies from offering inducements more than a year ago, the Solicitors Regulation Authority has to date resisted a ban on inducements. But an MoJ spokeswoman told Legal Futures that the intention is to ban all types of inducements for issuing a claim, including welcome payments, free gifts, cash advances and discounted services. “The government will also retain the power to extend the ban to other areas if that becomes necessary,” she added.
In a written statement to Parliament today, justice minister Lord Faulks added that inducements encourage “unnecessary claims, and suggests that lawyers are making too much money out of the process and seeking to offset the effect of the government’s much-needed ban on the payment and receipt of referral fees”.
Crispin Passmore, SRA executive director for policy, said: “We made decision not to ban inducements based upon our regulatory objectives and better regulation principles. We have been made aware of some increasing concern and will be looking at this afresh over the coming months.
“We will be asking various interested parties for any evidence they hold or are aware of so that we make a good evidence-based decision. Our remit is narrowly focused on what Parliament has asked us to do as a regulator, but Parliament may choose to ban inducements for wider public policy reasons than we cannot take into account.
“We will happily work with government and other stakeholders to ensure that any proposals are well thought through and deliver the intended objectives.”
The proposal to throw out compensation applications where the claimant has been fundamentally dishonest will apply unless it would cause substantial injustice to do so; presently a claimant will still receive compensation for the genuine element of their claim in most circumstances.
It will be a matter for the court to decide whether a claimant has been fundamentally dishonest based on all the circumstances of the individual case, the MoJ spokeswoman said.
“The court will have to be satisfied that the dishonesty goes to the heart of the claim. We would anticipate that the requirement would be satisfied in cases where, for example, the claimant was found to have deliberately exaggerated the extent and consequences of the injury to try to obtain a far larger award than the court finds is warranted.”
This will extend the current penalty for ‘fundamental dishonesty’, which is to lose the protection of qualified one-way costs shifting (QOCS).
Justice secretary Chris Grayling said: “We are making sure we do our bit to help drivers with the cost of running a car, and putting money back in their pockets.
“Insurance premiums have fallen by record amounts over the past year as we have turned the tide on the compensation culture but there is more to do. We are continuing to go after the fraudsters who force up costs for honest drivers.”
Association of British Insurers director-general Otto Thoresen added: “These changes are a very positive development for the vast majority of honest insurance customers who end up paying for the fraud of the minority. We applaud the decision to ban the distasteful advertising which offers cash or other inducements for personal injury claims. This only serves to reinforce to unscrupulous claimants that there is a compensation culture to exploit.”
Charles Hancock 
Financial inducement has done great damage to the profession and lawyers reputation. It’s too late for this generation. Scores of lawyers and CMS’s have made millions and are leaving or have left the profession with irreparable damage