Update on whiplash reforms
The MIB published this month its first two industry wide programme updates. The first circulated the customer journey to a wider audience than the MOJ assembled stakeholder group so far engaged with the project team. The second highlighted some key technology points – the most controversial being the revelation that the new service will not integrate with the existing Claims Portal, nor will it have bulk upload facilities for professional users.
As a result, MASS wrote a letter to the Lord Chancellor expressing grave concerns about the discriminatory nature of the latest developments, the lack of engagement, the lack of clarity on credit hire/repair and rehab, and the lack of protection for infants/protected parties.
The Stakeholder group meeting for July has, like the April meeting, been cancelled by the MIB/MOJ project team which is in itself concerning, although a smaller update session is planned for later in July. A number of bodies have, like MASS, expressed concern over the lack of engagement.
The MOJ Consultation on "The Future Provision of Medical Reports in Road Traffic Accident related personal injury claims" closed last month and we are now waiting for Ministerial sign off so that MedCo can implement any changes in line with the target deadlines.
Ministerial sign off is something that may become more problematic over the next few months with a Conservative leadership battle and likely reshuffle thereafter. That will be followed by summer recess, Brexit and Conference season all looming before the October proposed date by which the MOJ anticipates the Portal being ready to commence a 6 month public testing period.
Let us also not forget that we still need secondary legislation to be introduced via the affirmative procedure to bring in the tariff (after consultation with the Lord Chief Justice), proposed definition and ban on pre-medical offers; and secondary legislation presumably at the same time to confirm the rise in the injury small claims limit to £5,000 for RTA and £2,000 for EL/PL.
With the CPRC also grappling with the new Rules to accompany the changes, the prospect of meeting the April 2020 target for implementation feels a stretch at the present time…
Civil Justice Statistics
The MOJ has published the latest statistics for issued personal injury county court claims which are set out in the graph below and the decline in issued claims has in fact been reversed, although the Q1 figure remains significantly behind the 2018 Q1 figure – down by 11% to 29,800.
The graph below splits the issued injury claims into value bands:
This illustrates the split of injury claims by bracket showing the greatest number in the £1,000 -£5,000 bracket which as we know is the one likely to be hit most by the reforms. Indeed if one looked at that in isolation and had Cameron/Osborne's original proposal of banning whiplash claims below £5,000 then nearly 50% of litigated claims would disappear. However, with whiplash claims likely to move to the small claims track post reform, and the potential for playing around with the definition in the early stages, a significant decline in litigation is more likely to occur over a longer than a shorter period.
If post-reform claimants move to injury types other than whiplash and the surrounding definition and seek to inflate claims valuations, it will be interesting to watch the £5,000 - £15,000 bracket of this data set, as a rise would be expected, if not immediately then say by a year post-reforms to allow for claims to filter through the system. Claims in the £15,000 - £50,000 and £50,000 plus categories are a lot more stable and unlikely to decrease post reform.
The MOJ believe the ongoing reduction in injury claims can be attributed to a change in the Civil Procedure Rules on holiday package gastric illness claims, and whiplash reforms although there is nothing concrete we can see to back this up. We know that market consolidation is taking place with some familiar faces leaving the industry for good with the effect that litigation rates have dropped off in the meantime. It may also indicate that the fight against fraud and the increased pursuit of Fundamental Dishonesty decisions is paying dividends in reducing the number of unmeritorious claims issued.
The mean time taken for small claims and multi/fast track claims to go to trial was 36.9 and 58.5 weeks, up 3.9 weeks and 1.8 weeks respectively compared to the same period in 2018. This is in line with our experiences around the backlogs in the courts and probably isn’t yet reflective of the true picture, as there will be a number of claims ongoing in the system that haven’t yet reached trial.
The MOJ say that "additional investment has reduced administrative backlogs and the recent appointment of a large pool of Deputy District Judges that will begin hearing cases this year, as well as District Judge recruitment that is underway, will increase judicial capacity and improve the performance of the courts". However we are seeing a regular stream of hearings being adjourned at the last minute due to lack of judicial time which is a worrying sign particularly in the small claims track with the prospect of greater use of the small claims track post reform to resolve liability disputes in low value injury claims. Our view is that it may well get worse before it gets better.
There was an increase of 15% in the number of fast/multi track trials, and 5% in the number of small claims track trials.
Portal Statistics Summary
New claims intakes in May were a mixed bag with an increase in RTA but falls elsewhere, and the increase in RTA appears to be the result of more working days in May than April, rather than halting a longer term trend of very gently declining volumes.
The use of stage 3 is slightly up in RTA but declining elsewhere. The comparative use of stage 3 hearings compared to stage 2 settlements is close to the 30% level for RTA claims.
New RTA claims in May
May 2019 saw 56,506 new RTA claims; an increase of 2.76% from the April figure of 54,990.
An increase is to be expected between May and April, however May 2019 does represent a fairly significant drop from the May 2018 figures of 60,128 new claims and is the lowest May figure since 2013, when claims were in any event restricted to a lower £10,000 limit.
New RTA claims in May – time weighted
With 21 working days in May, the number of new claims presented per day averaged out at 2,691 claims per day in 2019, showing a continued drop since the start of the year, and a drop from 2,863 claims per working day in 2018.
New RTA claims over the longer term
Looking at the 12 month cumulative data for longer term trends, we see from the graph above a further reduction over the month since April from 695,509 to 692,618– a fall of 0.42%.
There has been a period of relative stability since June 2018 and the Portal figures do have a tendency to increase slightly (i.e. next month may show a slightly higher adjusted figure for new instructions in May) so it is too soon to consider this reduction to be meaningful but given the anticipated reforms in April 2020 a small dip is unsurprising.
In line with that, our data suggests that the number of different solicitor firms presenting RTA CNFs is falling over the last 24 months. On linear trend, there are around 2 fewer firms presenting RTA CNFs each month which indicates a contracting market, likely influenced by the forthcoming whiplash reforms.
Many DWF clients will be familiar with our classification of solicitors by how they source claimants… their "route to market". Analysis of DWF data evidences that those solicitors we classify as OTHER (they mainly source their work from accident management companies and claims management companies) are on the rise. We are seeing their market share increase by 0.35% per month on linear trend. This is of concern because statistically, this group includes solicitors who have a higher exposure to fraudulent and other adverse behaviours, including claims farming. The gain is at the expense of those solicitors whose route to market is exclusively or includes claims via legal expense policies or an insurer referral model. It will be interesting to see if this trend continues as we approach the reforms.
New casualty claims in May
There were 4,120 new PL claims submitted in May. This is a significant month on month reduction and the trend line is most definitely down. The 2018 average was 4,796 claims per month and this is the lowest monthly figure for May since the commencement of the Portal for PL claims.
There were 3,454 new EL claims in May, a significant 8.31% reduction from the 3,767 in April. As with RTA claims it is not uncommon for that figure to be adjusted upwards in subsequent data releases from the Portal but set against the increased working days in May it is painting a picture of reducing claims.
Indeed it is the lowest monthly total ever save for the December figures which are always artificially low.
EL disease claims
In May there were 393 EL disease claims down from 406 in April and a declining figure over the last 4 months from 466 in February. The numbers remain low generally and well below the numbers in 2014 and 2015. It is worth noting that many, if not most disease claims will not enter the Portal in any event. In the case of asbestos claims for example, this is because of value. In other cases there will often, but not always be more than one defendant involved in the claim. The downward trend in Portal claims is broadly in line with anecdotal and other evidence from the market as the deafness "surge" observed in 2012 - 2015 subsides. It will be interesting to see how disease notifications fluctuate if at all prior to anticipated changes in the costs regime in 2020.
New casualty claims over the longer term
It is easier to see from the cumulative graph above the longer term trends mentioned across EL and PL claims. This could demonstrate improving safety standards at workplaces over time plus the impact of fixed fees on EL and PL claims which are generally more complicated to run than a standard RTA case. Perhaps in a Volume environment, there isn't the same desire from the claimant side to push forward with this type of work given the margins. Again, this could be an area that changes with the RTA reforms in 2020.
Retention rates actually rose over the month in all four portals as the graph above demonstrates.
Longer term trends measured over the previous 12 months are also generally positive and increasing slightly.
RTA claims – stage 3 use and PSLA levels
In May there were 5,667 RTA claims in which a court pack was prepared, preliminary to use of stage 3 which is similar to the April figure in an area susceptible to monthly variations
The average monthly number of court packs prepared for RTA claims in calendar year 2019 to date is now 5,785. This represents a 4.41% reduction from the 2018 monthly average of 6,052.
The average general damages level in May rose very slightly from £2,811 to £2,818. This has halted a trend of monthly decline seen since the December high of £2,874.
We await the 15th edition of the Judicial College Guidelines which is expected this autumn, unless any consultation between the MOJ and the Lord Chief Justice in the whiplash reform process sees the publication of those guidelines pushed back.
We are however seeing an increase in injury related special damages and disbursements suggesting that claimant solicitors are looking at other ways to increase revenue rather than the general damages.
Casualty claims – stage 3 use and PSLA levels
Stage 3 usage in casualty claims remains a fraction of the levels seen for motor. In part this is inevitable with the significantly reduced number of claims staying in the Portal process for all types of casualty claims.
In the case of PL, the average for May was £4,247, very similar to the April figure of £4,258, and not too far away from the 12 month average of £4,219 suggesting a fairly static picture here.
With EL the level decreased over the month by 0.86% from £4,509 to £4,470.
With EL disease, the average level dropped 6.58% from £4,254 to £3.974 but as always sample sizes are very small.
Comparative use of stages 2 and 3
The graph above (disregarding the artificial EL peak affected by untypical data) shows in the case of RTA that the reduction in the number of claims proceeding to stage 3 when seen as a ratio of claims concluding as to quantum at stage 2, has halted. There has this month been a slight rise and the figure tends to hover either side of the 30% mark.
The position remains more volatile for PL and EL, which as stated above remain a lot lower around 10%.
Read all of our previous portal data analysis here Portal Data Analysis | DWF Insurance