Government PI reforms will push 80% of RTA cases into small claims court, research finds

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Twambley: set RTA small claims limit at £2,000

Hundreds of thousands of people face the prospect of pursuing their personal injury claims through the small claim court after new research showed that 80% of road traffic accident claims settled by solicitors over the past year were for less than £5,000.

It is expected that the Civil Liability Bill announced in last month’s Queen’s Speech will mirror the government’s pre-election PI reforms, including increasing the small claims limit for road traffic accident claims from £1,000 to £5,000 – although the Ministry of Justice has yet to confirm this.

Lobbying group Access to Justice commissioned economics consultancy Capital Economics to analyse figures supplied by 58 law firms, which between them settled 171,939 RTA claims in the previous year – approaching a quarter of all such cases.

This showed that nearly 80% of the cases settled for less than £5,000, with an average value of general damages of £3,029. According to the government’s Compensation Recovery Unit (CRU), there were 780,324 motor claims made in 2016/17.

A2J has described doubling the small claims limit to £2,000 – the figure being applied to other types of PI claim – as “an acceptable and appropriate increase” for RTA too. The figures show that some 23% of cases settled for less than £2,000.

The research also found that nearly 90% of disbursements paid out by firms in RTA claims were incurred on those that settled for less than £5,000. The average gross disbursement was £624.

A2J spokesman Andrew Twambley said raising the limit to £2,000 would reduce the number of claims registered with the CRU a year by around 140,000, which the group has estimated would save insurers around £400m a year.

He added that a £5,000 limit would “open up the floodgates to the injured public being targeted by an increase in unqualified claims farmers and cold callers”.

Mr Twambley urged new justice secretary David Lidington to take “a fresh look at the issue”, and consider A2J’s ‘alternative claims framework’, the only public attempt by claimants to craft a compromise to the government reforms.

This has been tweaked since first published in January, when a small claims limit of £1,600 was proposed. A2J has also moved away from the idea of introducing a rule that, if RTA claims were not submitted within 12 months of the accident, then no pre-issue legal costs would be recoverable.

Mr Twambley said: “We already have the solution in our alternative claims framework, which will reduce the number of claims by nearly a quarter. It can be implemented quickly, with no need for legislation. Compensation payments would be index-linked to make them ‘future proof,’ giving certainty to insurers and the courts alike.”

Mr Lidington was interviewed last week by leading legal journalist Joshua Rozenberg for his BBC Radio 4 programme Law in Action.

Though the broadcast programme did not touch on the PI reforms, Mr Rozenberg has subsequently reported that during the interview he did ask the new Lord Chancellor whether a £35 cut in motor insurance premiums would result from the Civil Liability Bill.

“The insurers have said publicly that they would pass on that saving to their customers,” he told Mr Rozenberg. “The evidence suggests that there were a large number of unfounded whiplash claims.”