Whiplash: Claims value and gross written premiums fell over the three years too
The whiplash reforms saved policyholders £31 in premiums in the first three years of their operation, according to figures released yesterday by HM Treasury.
The long-awaited, if brief, report on the effect of the Civil Liability Act 2018 on policyholders – which the Act required the Treasury to produce – essentially said the reforms have achieved their objective.
However, in the run-up to the reforms, the Ministry of Justice said they would save £35 a year.
The Financial Conduct Authority collected data from 30 insurers covering the period 1 April 2020 to 31 March 2023.
They had to develop a counterfactual scenario to estimate how much higher whiplash claims costs and insurance premiums would have been were the Act not to exist.
The total value of third-party personal injury claims fell year-on-year, with insurers pointing to the impact of macro-economic factors, particularly the pandemic. Still, compared to the counterfactual, claims were worth £340m less than they would have been over the three years.
The disparity was sharpest in 2022-23, when insurers said the £2.33bn in total claims received was 7.8% lower than what would have otherwise been expected.
Overall, the value of claims fell by 18%, or £560m, over the period; according to Compensation Recovery Unit figures, the number of motor claims dropped by roughly the same percentage, to 367,535.
The Official Injury Claim portal, which slashed damages and recoverable legal fees for whiplash claims lasting up to two years, came into force on 31 May 2021.
Total gross written premiums (GWP) were also lower each year. Over the three years, GWP fell from £12.7bn to £11.8bn, but would have been £12.9bn to £12.3bn in the counterfactual scenario.
Average premiums in 2020-21 were £391 (£4 saving on the counterfactual), £357 in 2021-22 (£12) and £351 in 2022-23 (£15).
Eight of the 30 indicated “some wider benefits”, the report said, such as the reinvestment of savings into technology to improve customer journeys and claims experiences.
It went on: “A small number of respondents expressed their concern that there had been a displacement of cost savings from whiplash injuries towards non-whiplash soft tissue injuries, which they felt is an ongoing trend and increased after the Act was implemented.
“Some respondents noted a decrease in resolution time for whiplash-only injuries, possibly due to mandatory medical reports deterring fraudulent claimants. Claims for additional soft tissue injuries were often reduced after medical reports were received.”
The Act required the Treasury to give a view on whether and how policyholders have benefitted from any reductions in costs for insurers.
It did so in one sentence: “The information provided by insurers shows that individuals who are policyholders benefitted from the reductions in costs for insurers through paying lower premiums over the reporting period of 2020 to 2023 than would otherwise have been the case if the Act didn’t exist.”
Jonathan Scarsbrook, immediate past president of the Association of Personal Injury Lawyers, said its analysis of Office of National Statistics and Association of British Insurers data showed a 71% increase in motor insurance premiums since the reforms were introduced, despite an 11% decrease in the cost of injury claims settled by car insurers.
“The evidence has always pointed to repair costs being behind rising premium prices. It’s time the government focused on these costs and the cost of hire vehicles rather than removing the right to full compensation for physical and psychological harm.
“Slashing compensation for painful, avoidable whiplash injuries to a fraction of their actual value made a mockery of compulsory insurance which is designed to compensate people properly for avoidable injuries.
“This is a lose-lose situation for consumers, and they should be furious. They are spending more than ever for compulsory insurance on the understanding that they will be looked after if anything goes wrong. While vehicle damage can be inconvenient and worrying, bodily harm is the worst possible thing that can happen to someone.”
Matthew Maxwell Scott, executive director of the Association of Consumer Support Organisations, argued that consumers deserved better than this “wafer-thin report… which feels like the financial services industry is marking its own homework and somehow still failing the test” – it showed savings of £74 per motorist have failed to materialise.
He continued: “Since the Civil Liability Act was passed, motor injury claims have fallen by half and average premiums have increased by nearly three quarters.
“You don’t need to be a cynic to ask whether this whole exercise was simply a stretched-out stitch-up between HM Treasury and the insurers, most of whom made huge profits last year.
“Insurer demands for further personal injury reforms must now be seen for what they are, which is an attempt to bolster shareholder returns at the expense of injured people…
“Given the failure of the reforms, it is a shocking mistake from the government to let its motor insurance taskforce die on the vine.
“It needs to be reconvened immediately and serious questions asked as to why insurers are letting people down with impunity. The case for a full Competition and Markets Authority investigation has never been stronger.”
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