Strategic Update: Insurance industry news and claims data analysis – April 2022

Medical Examinations

In a step which will please most insurers and defendant practitioners, MedCo has reintroduced the ban on remote examinations, which was lifted temporarily due to the Pandemic. Whilst it can be said that the remote exams kept cases moving during the COVID-19 crisis, medical experts were no doubt frustrated by the inability to physically examine claimants and perform clinical tests, and we have seen the number of recommendations for second medical reports increase. The restriction will return from 1 July 2022.

Note that remote examinations may continue for those especially vulnerable to COVID-19.

The CPR itself is silent on the issue of remote medicals, and outside MedCo the decision whether or not to accept a remote medical is one for the court, who will no doubt consider whether it was reasonable and necessary. As we move away from social distancing, we would expect that there will be increasing pressure on claimants to justify remote examinations, particularly if the claimant is working and socialising outside the home.

Elsewhere, MedCo has issued a welcome reminder to medical experts reporting on non-whiplash injuries that they have a duty to explain the mechanism of such injury; in other words, causation must be addressed within the report.

We have seen numerous examples of medical reports which offer no explanation at all of how an injury was sustained. Insurers are unable to validate these claims, causing many to drop out of the OIC process unnecessarily.

Finally, MedCo has also released its own quarterly data (pdf), timed to accompany the OIC data release from the Ministry of Justice. The usual data can be found relating to the number of searches and selections for medical experts. Unrepresented claimants are still attracted to instructing direct GPs as opposed to solicitors who continue to use MROs, and when solicitors do use direct experts, we see a significant proportion of physiotherapists.

The long-awaited MOJ response to the second part of the consultation dating back to 2017 was published last month, and in Shakespearean terms, I am sure we can agree this is 'much ado about nothing.'

Looking at such matters as referral sources, the credit hire market, QOCS/late discontinuance, and rehab, the MOJ decided to simply keep a watch on industry developments as the OIC embeds further. The MOJ did highlight that there was support for rehab to come under MedCo's remit but only as a longer term option. Also discussed was the use of a Barème style system, where damages awards are fixed through a combination of points and tables – again this would only be considered as a long term solution and given the judiciary's opinion of the whiplash tariff, it would take some work to achieve. Our full update on the MOJ Response is here, MOJ finally responds to Part 2 of Whiplash Consultation.

It feels like the DCP has arrived in a hurry when it has actually been available in pilot form for 12 months – the problem being that apart from issuing the claim, hardly any use has been made of the pilot, with not a single defence filed in the DCP in that 12 month period. Now it is compulsory for represented claimants to use the DCP to issue and serve the claim, albeit with the caveat that the insurer must nominate and expressly advise that use of the portal is accepted before service through the DCP takes place, otherwise the claim is served in the usual manner upon the defendant.

Other changes include the requirement for the directions questionnaire to be filed and served with the defence. This means that firms have around a month to six weeks less time to prepare directions, however on the positive side, this should bring down lifecycles and reduce delay.

There are likely to be more judgments entered than previously due to a rule change where claimants may obtain default judgment as soon as the acknowledgment date has passed. Read more in our full update on the DCP, The Damages Claims Portal Pilot.

The updated JC Guidelines were released on 11 April 2022. The headline news is as follows:

• Continued use of RPI as the measure of inflation, with an end of September 2021 figure of 6.56% broadly utilised.
• No further guidance on additional injuries and interaction with the whiplash tariff.
• Two new categories, for sexual abuse and work-related limb disorders.

It is fortunate that although only published in April 2022, the figures for inflation were taken up to September 2021 before inflation really started to rise recently. The increase could have been a lot worse.

The introduction makes it clear that the authors are going to leave the issue of additional injuries well alone. They also have a bit of a dig at the whiplash tariff perhaps, by commenting that awards are at the discretion of the judiciary – "One of the objectives of the Guidelines however is to achieve consistency in awards of general damages recognising that this is a book of guidelines, not tramlines, and that any award made is the prerogative of the court".

The Minor Injuries section will be of most interest for people from an OIC perspective, and they have increased by just short of 6% with no changes to the structure of the section. There are now references to the whiplash reforms in the Minor Injuries section and a reminder that the tariff will apply for all cases save for relevant exceptions, such as vulnerable road users.

Compensators who are concerned about the increase in non-tariff injuries reported should note that the bottom bracket for tinnitus has now breached £7,000 – well above the RTA SCT limit of £5,000.

This is as good a place as any to mention that the increase in the small claims limit for EL/PL and travel claims has now come in, a rise from £1,000 to £1,500. As regular readers will know, EL/PL average portal settlements are now around £5,000 so it is doubtful that many claims will be caught by the increase.

Hot off the press comes news of proposed changes to the Highway Code to account for self-driving vehicles.

The Government was responding to a public consultation from July 2021, and the changes to the Code are designed to ensure the first wave of technology will be used safely, explaining that while travelling in self-driving mode, motorists must be ready to resume control in a timely way if they are prompted to – such as when they approach motorway exits.

The plans also include a change to current regulation, allowing drivers to view content that is not related to driving on built-in display screens while the self-driving vehicle is in control. It will, however, still be illegal to use mobile phones in self-driving mode, given the greater risk they pose in distracting drivers, as shown in research.

The DfT had commissioned a survey of learner drivers, advanced drivers, and 'normal' current drivers to gather feedback to ensure that their draft wording is clearly and correctly understood. What is clear is that there is still some issue with the concept of 'giving over' control to the automated system and the idea that the user can look away from the road.

I hope that many of you were able to attend the recent DWF E-scooter Conference which focused on claims and liability, as well as looking at the local government and highways angle. In terms of developments, we continue to see serious accidents and only last month there was a tragic fatality reported in London involving a 14 year old girl.

The trials have now been formally extended to November 2022, and The Parliamentary Advisory Council for Transport Safety (PACTS) continues to monitor developments. Many of the problems with e-scooters appear to arise from private e-scooter use rather than the local authority controlled trials. PACTS has prepared its full report, which is lengthy and detailed. It strongly recommends training, maximum speed limits, use of helmets and compulsory third party insurance. Micromobility and e-scooters have an important place in the Government's future transport plans, particularly for "last mile" journeys. The Government is under pressure to find a balance between encouraging the use of micro-mobility solutions and protecting the health and safety of road (and pavement) users, including e-scooter riders themselves.

And in breaking news yesterday, Transport Secretary Grant Shapps indicated that proposals for the regulation of e-scooters will be announced in the Queen's Speech on 10 May. Appearing before the Transport Select Committee, the Minister highlighted the concerns mentioned above arising from private e-scooter use and noted that the rental trials have broadly been popular and successful. Stopping short of confirming that in the future people will be able to buy private e-scooters and use them on the roads, Mr Shapps said his priority is to crack down on the illegal use of non-compliant e-scooters, by making it illegal to sell e-scooters that don't meet the proper standards. 

The first stage, however, in being able to properly regulate e-scooters and decide on usage in more detail is to have legislation that describes them as a category of transport. Following that, the DfT will consult on the correct way to legislate and restrict or enable their use. In the meantime, the DfT continues to remind retailers to remind people that privately owned e-scooters can't be used on roads. Mr Shapps did acknowledge though that some retailers, using Halfords as an example, are responsible about their sale.

Peter Bone's Private Members' Bill, Motor Vehicles (Compulsory Insurance) Bill, has been progressing without hindrance through the Lords, with the committee stage bypassed and it passed its third reading in the House of Lords on 25 April 2022. It should soon receive Royal Assent and pass into law, meaning that the Vnuk principles will no longer stand and the UK will effectively revert back to the position under the old Road Traffic Act 1988 with liability "caused by, or arising out of, the use of a vehicle on a road or public place".

It is noteworthy for being one of the few private members' bills to hit the statute books and whilst the EU had themselves taken steps to introduce a new definition of use of a vehicle, the key benefit will be that compulsory insurance for off-road accidents will not be required including motorsports, golf carts, ride-on lawnmowers etc. The Government has reported that savings could approach £2bn, or £50 per policy for consumers.

The UK has not seen the current level of general inflation for 30 years. The Consumer Prices Index (CPI) reached 7% in March 2022, up from 6.2% in February 2022 and the highest level since 1992. Last month the Office for Budget Responsibility (OBR) forecast 8.7% by Q4 2022.

In the Spring Statement, we saw an increase in the threshold at which National Insurance Contributions will be charged, effective from July 2022, which, for some, will mitigate April's 1.25% increase in National Insurance Contributions.

Wholesale energy prices increased rapidly in the second half of 2021. Whilst consumers were protected somewhat by the energy price cap, this increased by more than 50% in April 2022. Observers predict that the price cap will increase further in October 2022 and there is no price cap for non-domestic energy, and inevitably increases in business energy bills will feed through to higher consumer prices in general. Compensators will be considering how these pressures will drive claims inflation, with the impact likely to be felt across a broad range of claims.

In higher value injury claims in addition to wage inflation we may see increases in claims for direct energy costs, given time spent at home due to disability, as well as an increase in running costs on adapted accommodation and aids and equipment requiring power. A further increase in transport costs is also likely based on increased fuel costs, and more expensive vehicles and aids and equipment. It may even be the case that we see a shift towards the use of PPOs to protect against inflation.

In property damage claims, supply chain interruption had receded slightly by late 2021, but is now back upon us post the outbreak of the war in Ukraine. Costs of production of goods and services generally are increasing and given the current skill shortage, wage inflation is expected. The overall net effect will mean a continued increase in building material and build costs.

Many of the factors detailed above come into sharp focus for motor insurers particularly in respect of claims for vehicle damage and credit hire. This is an area where inflation was already a significant issue prior to the 2020 pandemic and subsequent economic disruption. The increasing cost of new and used vehicles, rising repair costs, and disruption in supply, leading to longer repair periods, will only exacerbate the issue.

A review of the latest transport data shows that private car usage is now consistently a few percentage points over the norm at weekends and around 90% during the week. The end of lockdowns has not seen a return to pre-pandemic levels which is reflected in motor claims frequency and most likely reflects the continued approach to working from home.

On the other hand HGV and van usage held up throughout the pandemic and levels are now quite a way above pre-pandemic use. Notably light commercial vehicle usage has regularly exceeded HGV usage for the first quarter of 2022. This is consistent with the end of social distancing and the increased demand for services such as home improvements etc. 

Public transport levels remain stubbornly low, with National Rail at around 80% at weekends and 70% in the week. This seems slightly inconsistent with private driving levels but may suggest that those who have returned to the workplace are choosing to commute by car rather than by rail. A long term fall in rail usage would impact on the governments net zero targets and would also call into question the sustainability of lesser used services. With all this in mind the government has announced a scheme to reduce advanced rail costs in April and May to encourage people back onto trains. It will be interesting to see how this affects both rail and car usage data in the coming months.

Tube use in London is still very low, around 65% of usual in the week and 80% at weekends.. It should also be remembered that tourist numbers remain suppressed which will also impact on public transport usage, especially in London. We can also expect cycling statistics to rise as the weather improves. March has already seen an increase.

We now have data for the October to December 2021 period which means we can show you the full 2021 picture in terms of small claims, fast and multi track performance. Despite the use of virtual hearings and the number of cases issued falling, the time taken to get to trial across all tracks has progressively worsened. 

In the small claims track, it is now taking on average 50.7 weeks to reach trial:

In the fast and multi tracks, the picture is no better. It is taking nearly 30 weeks from issue to even allocate to track, although backed up CCMCs will account for some of this. It is now taking an astonishing 72 weeks on average to reach trial from issue. This figure has gone up by around 20 weeks since 2010. 

We now have the third release of data (pdf) for the OIC portal covering the months of December, January, February, and March. This should now settle to quarterly releases as originally envisaged as this cycle was extended to match up with the end of quarter one. See further above as well in respect of MedCo data.

Claims frequency – combined OIC/MOJ statistics 

There has been a general recovery in terms of combined portal claim submissions over January, February and particularly March 2022 with claims volumes not too much lower than the equivalent period a year earlier. 

Since the low of 21,064 new submissions in December 2021 there has been a steady if unspectacular rise in new OIC cases, reaching a new high of 26,436 new claims in March 2022. As the image above shows when the OIC and MOJ volumes are combined volumes have been fairly consistent since July 2021. There were 8,287 new MOJ portal cases in March 2022 giving a combined total of 34,723 new CNF/SCNFs.

Claimant bodies have drawn attention to the disparity between claim volumes before the pandemic as also evidenced in the illustration above which shows claims levels for January and February 2020 at between 50,000 and 60,000. There have been attempts to suggest that the reduced volume of claims being submitted in the OIC compared to the pre-pandemic numbers represents a failure of the system, and the OIC portal in particular. It is worth remembering that in its 2018 impact statement the Government confirmed the intended effects of the reforms:

"The whiplash measures will tackle the high number and cost of minor and unmeritorious claims so reducing the cost of premiums to motor insurance policy holders and help to counteract the wider' claims culture' associated with such claims."

The Government made a policy decision to balance the interest of those who had sustained minor injuries with the wider interests of society. This has been misinterpreted to mean that only fraudulent claims were to be discouraged/reduced as a result of the reforms but this was never the case.

There has been much made of IT issues with the OIC but the various industry discussions suggest that these issues centred around progressing the claims in the OIC portal and not in registering a claim. On that basis the volume of claims on the portal should not be adversely affected.

The data release itself contains a caveat around the numbers: "There are significant non-service factors influencing driver behaviour and accident rate. These include the impact of COVID-19 as well as the general economic factors of cost and inflation that will indirectly influence vehicle miles and vehicle parc and ultimately accident rate."

This suggests that the MOJ believes the fall in claims is driven by reduced accident frequency, and whilst we understand that accident frequency is down somewhat compared to pre pandemic (for personal lines insurers in particular) this in itself would not seem to entirely account for the drop in injury frequency. Whilst numbers could yet recover over time, the significant reduction in numbers may suggest that the Government's objectives are being met, at least in respect of claims volumes.

Representation

During the four-month period of data, little has changed with the figures still showing 91% of claimants to be represented and 9% litigants in person.

CMC representation on the Portal itself remains very low indeed however at 0.2%.

Liability decisions and exits

As evidenced in the graph below the number of matters where liability is denied in full has dropped from 15% for represented claimants in the last data release, to 13% in this release. Interestingly the number of claims where insurers have chosen to make initial split liability offers remains extremely low. This may be as a result of compensators choosing to deny liability initially whilst investigations are ongoing, before making split liability offers at a later stage.

We can also see from this graph that causation disputes have been raised in only 4% of represented and 1% of represented claims upon receipt of the SCNF in the OIC. There is of course a further opportunity to raise causation upon receipt of the medical evidence.

Reasons for OIC exit 

The graph below shows the numbers of claims which have been removed by the compensator from the OIC process and also the number of claims which have been withdrawn by Claimants from 1 December to 31 March 2022.

A breakdown is provided by the OIC of the reasons for exit but it does not distinguish between the claims which have been withdrawn by the claimants and those which have been removed by the compensator. The graphs below show the various reasons for claims leaving the OIC portal process for both represented and unrepresented claimants. 

There were 10,953 claims which exited the process for represented claimants in the index data period. A total of 13% of those exits were because of an allegation of fraud equating to 1,424 claims in total. We can of course assume that these claims were removed by the compensator rather than withdrawn by the claimant on this basis. 

For unrepresented claimants 10% of the 1,004 claims which exited in the index data period did so because of allegations of fraud and dishonesty, a total of around 100 claims.

The most common reason for claims exiting the OIC process for both represented and unrepresented claimants is complex issues of law at 42% and 32% respectively. Certainly for represented claimants it should not be assumed that these claims have been removed by the compensator. DWF has seen examples where claimant solicitors have incorrectly removed claims for reasons of complexity. Citing "complex issues of law" could of course also cover a multitude of sins.

As the data develops it may be that it is adjusted to distinguish between those claims which have been withdrawn and the reason for doing so, and those claims which have been removed and the reason for doing so. 

Additional injuries and exceptional circumstances 

There continues to be a significant number of non-tariff injuries being presented, with only 32% of claims being tariff only, a slight reduction from 33% in the last set of data released. 
64% of cases were mixed claims including tariff and other injuries and 96% of claims included a tariff element, the same as the last update. 

The uplift for exceptional circumstances or exceptional injuries continues to be more regularly requested by unrepresented claimants which may suggest that there is some confusion around when an uplift should be requested. Any judicial guidance on the matter seems a long way off although it is possible there could be further guidance when the claimant guide to the OIC is next revised.

Settlements

The OIC have now released additional information in respect of settlements. 17,607 cases had settled overall since launch with 13,843 in this reporting period. 25% of settlements were unrepresented (compared to 52% in the previous data batch) with 75% represented now.

Interestingly, 93% of claims were settling within the first three tariff bands, although this is expected to rise over time as claims mature. 51% are in the 3-6 month bracket so far.

No breakdown of the average settlement in the OIC has been provided, but it has been split into tariff and non-tariff quantum.

We can now see the average settlement for tariff injuries and then separately for non-tariff injuries. For represented claimants the average tariff injury is settling at £655 and for unrepresented claimants £666. The figure for the non-tariff element is £420 and £446, respectively. It would be useful to know what the combined average injury figure is, and again this may be something we are provided with as the data matures.

Likewise there is no breakdown of the profile of injuries presented by represented claimants compared to unrepresented. It may be the case that unrepresented claimants present a higher percentage of tariff only injuries but that can only be conjecture without the data to support.

Represented v unrepresented data comparison

To summarise what the data is telling us about represented and unrepresented claimants, as it stands, there seems to be a positive story for unrepresented claimants. Of the 19,031 claims submitted, 5,543 have settled which amounts to 29.13%. The same calculation for represented claimants gives a settlement figure of 6.34%.

Unrepresented claimants are also achieving slightly higher average awards for both tariff and non-tariff claims than represented claimants as detailed above. Insurers are less likely to dispute liability when an unrepresented claimant presents a claim, and insurers are less likely to allege fraud/dishonesty against an unrepresented claimant.

It is still very early days in the development of the data and it may well be that the disparity between the unrepresented and the represented claimants shifts over time, especially if represented claims transpire to have higher severity.

At the present time, there is little evidence that unrepresented claimants are being treated unfairly by insurers which is encouraging for the future of the OIC and the numbers of unrepresented claimants. Particularly as those represented claimants without the benefit of Legal Expenses Insurance may well be sacrificing a percentage of their damages in exchange for representation.

RTA

The past quarter has yielded further reductions in the number of CNFs submitted to the MOJ Portal as use of the OIC becomes more established. There were 8,771 new submissions in January 2022, this dropped to 7,909 in February before rising again in March to 8,287 new claims. We had speculated that the 'new normal' may be around 10,000 portal cases per month, but it appears that it may average out slightly lower. The picture is pretty stable now.

EL 

EL accident claims in the portal have continued to rise on average, with 2,475, 2,436 and 2,699 new cases received in January, February, and March 2022, respectively. 

PL 

It does seem that the new high we commented on previously of just over 3,500 CNFs was a high watermark with new claims now hovering just above the 3,000 mark. 3,136 new claims were received in January, 3,099 in February and 3,300 in March 2022.

PSLA and court packs 

The rise in PSLA quantum settlements continues as expected with the reduction in claims worth less than £5,000 (those claims now going through the OIC portal). Average settlements were £3,662 in January, £3,853 in February and then a new record of £3,982 in March 2022. With the new JC Guidelines launching in April 2022 and a general rise of nearly 7% in terms of inflation this is likely to increase higher still.

Numbers of Stage 3 court packs continue to slump, with only 1,969 in January, 1,575 in February and 1,649 in March 2022 and again this may well reduce further as the overall number of claims within the portal process has reduced. 

The temporary rise above £5,000 in EL average settlements has abated, with figures of £4,887, £4,875, and £4,735 for January, February, and March, respectively. It is a very similar picture in PL cases. We anticipate a further rise in coming months driven by the increase in the JC Guidelines.