The Q4 2018 data for PI litigation shows a reduction of 6.9% from the level seen in Q3 and is the lowest quarterly total since Q3 of 2011. It is the 4th consecutive quarterly decrease.
It is though expected to see a reduction between Q3 and Q4 of this extent and the same trend has been seen in each of the previous 3 years. The particular level of the latest quarter is therefore partly due to the decline of litigation rates throughout 2018.
The MoJ highlight in their review of the data the 19.0% fall-off when the latest quarter is compared to Q4 of 2017. The extent of that drop-off is though likely to over-estimate the true rate of decline.
The annual reduction when 2018 is compared to 2017 is 12.7%, the largest decrease in the annual data to date. This percentage is though likely to be a truer reflection of the extent of what seems to be a decreasing rate of litigation in PI cases than that highlighted by the MoJ.
The MoJ attribute the latest falls to reductions in whiplash claims due to the incoming reforms and also changes to procedure as to the bringing of gastric illness claims. The ongoing repercussions of the incoming Civil Liability Act and associated reforms are likely to have a continuing effect into 2019 and beyond.
The data on quantum of claims shows that it is claims worth up to £15,000 which are affected to a greater extent by the reforms and therefore show the greater reductions. The need to be vigilant against deliberate attempts at inflating quantum remains.
Number of litigated PI claims assessed quarterly
In their summary accompanying the release of the latest data the MoJ note that in terms of overall litigation that litigation numbers in Q4 rose 29% to 533,000 on the back of an increase in what are termed 'specified money claims' (being claims made for a specific sum of money) which rose 42% from the position a year back. These are essentially debt claims and the trend represents a return to previous levels following the initial reduction in litigation caused by the introduction of the Debt Pre-Action Protocol in 2017.
But it is personal injury claims which can be assessed in numerical terms most directly as they are specifically in their own category within the data and it is those numbers which are shown in the graph above. They show not an increasing trend but a reducing one: the latest quarter represents a reduction for the 4th consecutive quarter.
Such a trend is not though unique as there were 5 consecutive quarterly reductions between Q1 2013 and Q2 of 2014. We will see next quarter whether the same phenomenon is repeated.
Q4 of 2018 is assessed as a provisional figure showing that there were 28,408 new PI litigated claims. This represents a fall of 6.9% from the previous quarter's level of 30,508.
When compared to Q4 of 2017 when the number stood at 35,068 there has (as the MoJ say in their report) been a reduction of 19.0% and it has been that percentage which has been highlighted in certain press reports on the data which have been written so far.
It is true to say that this is the lowest quarter for newly issued PI claims since Q3 of 2011 when the number stood at 28,068: the current level is 1.2% higher.
When we compare the latest quarter to previous Q4s we see that while a reduction of 19.0% is not unprecedented, it is a greater reduction when compared to the figures for other final quarters. Comparing the latest Q4 figure to the Q4 levels over the last 5 years we see that the latest Q4 level is clearly below other final quarters by a double digit percentage over each of the last 5 years.
Those reductions to measure against this year's fall of 19.0% were 11.5%, 14.6%, 17.8% and 23.8%. The 19.0% decrease seen this time is only less than the 23.8% decline seen when the final quarter of 2015 was compared to the same quarter in 2014.
As between Q3 and Q4 of any year, 2018 with its reduction of 6.9% fits well with the drops of 7.9% in 2016 and 7.7% in 2016. It presumably reflects a dropping off of claims-related activity towards the end of the calendar year as we seen increasingly with new claims entering the portals in December in recent years.
On that basis the quarterly decline to the current level of 28,408 follows explicably from the starting point of a reduced level of litigation seen in Q3.
Number of litigated PI claims assessed annually
Inclusion of the Q4 data of course completes the annual figure for 2018 albeit that the final quarter remains currently provisional. On this basis 2018 ends with an annual total of litigated PI claims of 124,126. This is around 3,500 lower than the number we were projecting for the calendar year at the end of Q3 and reflects the drop off in the number for the latest quarter. This is the lowest annual total since 2011.
The annual decrease as between the 124,126 new litigated PI claims in 2018 and the 142,205 in 2017 was 12.7%. The previous largest decline was the 7.9% between 2013 and 2014.
Over recent years then have been alternative annual decreases followed by increases. The reduction of 7.9% seen in 2013/14 was followed by an increase of 8.6% between 2014 and 2015; there was then a 6.9% fall between 2015 and 2016; after which there was an increase of 6.2% over 2016/17 prior to the decrease of 12.7% which we have just seen.
The prospects of this trend being continued by an increase between 2018 and 2019 must however be seen as very uncertain. It is right to say that 2018 represents a low level from which an increase could follow, but these are of course changing times.
In their review of this data the MoJ comment that they anticipate that the reduction in PI litigation "can be attributed to a change in the CPR on holiday package gastric illness claims, and whiplash reform". This is exactly the same terminology that they used in the release of last quarter's data. Again there is no published MoJ data to verify the comment which may be subjectively based.
There is reason however to see the MoJ's comment as valid, in terms of the two criteria that they mention as explaining the continuing reduction of litigated PI claims, though as there is no specific data to stand behind the comment, we cannot evaluate in actual statistical terms their respective effects.
It is though reasonable to see the impact of the reducing level of GI claims, while significant, as impacting over a briefer period; while the effect of the reforms to be introduced by the Civil Liability Act and associated reforms are likely of course to be felt over the longer term and are likely to justify a continuing drift away from RTA claims to those of other types which are less directly affected by the reforms.
While there is at present relative stability in terms of new claims being submitted to the injury portals as seen in our analysis of the Claims Portal data, it does appear reasonable to conclude that there is some degree of greater reluctance to press claims forward into litigation.
Number of litigated PI claims by reference to claims value
We can then look at the data for specific value bands to see which type of claim is being impacted most clearly by the reduction in litigation.
If we compare Q4 of 2018 with Q3, the preceding quarter, then we see:
- £1-5k: down 5.9% to 12,822
- £5-15k: down 7.5% to 8,256
- £15-50k: down 6.7% to 2,962
- Over £50k: down 2.6% to 743
When looking at the same data that was available at the end of the previous quarter we saw there to be quarter-to-quarter increases in the higher two bands, albeit reductions in the lower two bands. That trend including certain increases does not continue this quarter, though the higher value bands show smaller reductions especially the highest band.
On the other hand if we compare Q4 of 2018 with Q4 of 2017 then the data shows:
- £1-5k: down 20.9%
- £5-15k: down 22.9%
- £15-50k: down 12.1%
- Over £50k: down 10.8%
We can conclude that the greater reductions on both measurements are in the two lowest value bands; the smaller reductions are those in the higher two bands with the most limited reduction being seen in relation to claims worth over £50k.
This is of course unsurprising where the type of claims less frequently proceeding to litigation following recent implemented and announced reforms include whiplash and GI claims which will most frequently be for sums not exceeding £5k, or where they exceed that level are likely in the main to be limited to £15k.
The trend of smaller reductions set alongside certain increases at the higher quantum end (over £50k if not over £15k) set against larger reductions in claims worth under £15k and especially claims under £5k is expected to continue.
This will be not only as a result of increasing interest on the part of claimant operations in claims of that type, but also a greater desire to present low value claims as being of higher value so as to seek to reduce the effect of the reforms through inflation of quantum. Insurers will need to remain vigilant in response to those anticipated behaviours.
For more information, please contact Simon Denyer.