Updated portal and MoJ litigation releases show a disrupted market continuing to adapt in the face of further legislative and procedural reform
14 March 2017
The latest release by Claims Portal of the monthly data for February, alongside publication by the Ministry of Justice of statistics showing numbers of litigated injury claims, allows us to update our assessment of latest market trends.
We do so at a time when the market continues to adapt to the incoming process reforms which have moved a stage closer since last month's portal analysis, with the publication both of the MoJ's response to their recent consultation affecting both whiplash claims and the small claims track limit as it applies to all types of injury claim, and Part 5 of the Prisons and Courts Bill.
Recognition of February being a shorter working month allows us to see that in fact that the number of new claims into all of the portals was relatively stable last month. Longer term trends as to new portal claims though are continuing to point downwards: while the rate of decline has increased in RTA, it has levelled off in EL which is to be less seriously affected by incoming reform.
We can continue to see both upward movements on PSLA levels especially for RTA claims which will no doubt continue until a reform package in place, as well as increased use of stage 3 to a level where now nearly 30% of RTA settlements involve use of stage 3.
The MoJ litigation data includes the last quarter of 2016 and shows an annual decrease in litigation rates of 6.2% which is unsurprising in the light of the factors causing the decreasing volumes in the portal set alongside the disrupted market which continues to require further reform ahead of the new challenges now being faced.
New RTA claims in February
In February there were 62,121 new RTA claims submitted to the portal, a fall of 5.0% from the level seen in January. This level of new RTA claims is in fact the lowest for the month of February since this portal came into existence. When compared to the level seen 12 months ago in February 2016 the current level of new claims is lower by 14.0%.
But in reality the new RTA claims level for last month is a continuation of what we saw last month, which was as the data from Claims Portal is now presented, was also the lowest January since the RTA portal opened.
As would be expected from the comparative lengths of the months of January and February, there was one more working day in January than last month, which is equivalent to the working month being reduced by 4.8% as we moved into February. This is almost identical to the fall in the number of new claims at 5.0%.
The identical height of the two bars to the right of the following graph makes the point.
We have seen this factor linked to the number of working days in operation regularly operating in the past and it is clearly doing so this month, as it usually does between higher volumes in January followed by lower ones in February.
The only exception to this was 2016 when we saw a 2.7% increase between those two months, but we believe that was entirely due to that year being a leap year in which there was in fact one more working day in February than in January.
New RTA claims on a 12 month cumulative basis
On this basis the fall last month was significant at 1.3%. It's the largest monthly fall since last July and represents an increasing rate of decline. This also represents the 16th monthly fall over the last 18 months.
Over the last 12 months we have now seen a fall of 7.8%.
The current level of new claims over the preceding 12 months now stands at 800,044. This is currently 9.1% below the August 2015 peak of 880,044 but is now only 3.5% above the low point of 771,709 in April 2014 at which point we had seen the factors caused by the introduction of LASPO having worked their way through the system.
If something near to the current rate of decline on this basis continues, then by the middle of 2017 we may well see the 12 month cumulative RTA intake levels matching those last seen three years previously in 2014.
When we have the new RTA claims data for March in a month's time we will be able to fine tune the analysis over financial years which we carried out partly on a predictive basis last month.
New casualty claims in February
EL and EL disease show increases over January, while PL demonstrates a fall. Adding in the factor that the fewer working days in February are worth an uplift on volumes over that month of 4.8% produces the result of a month on month net increase in all three casualty portals between January and February.
There are some signs of volumes beginning to firm up in EL when compared to PL and EL disease.
New PL claims
In February there were 4,969 new claims, a fall of 3.5% from January, but that fall is less than the uplift due from the shorter working month of 4.8%. As was the case in January, this number of new claims into the PL portal is the lowest since it opened.
The number of new PL portal claims in February was 6.4% below the 2016 monthly average of 5,311.
New EL claims
There were 4,149 new EL claims in February, which represents a 3.5% increase over January even before the length of the working months is considered. It is still a lower number than seen in the months of February over the preceding two years.
But the February new EL claims number is at a comparable level to the 2016 monthly average which stood at 4,142.
New EL disease claims
There were 872 new EL disease claims last month, up 3.1% from January without reference to monthly working days. But the level was the lowest number of new EL disease claims since that portal opened.
The number for last month of 872 is 8.1% below the 2016 monthly average of 949.
New casualty claims on a 12 month cumulative basis
As we saw last month, with EL claims the statistics show a slowing rate of decline. In the case of PL there is still a significant ongoing fall, while in the case of EL disease the rate of decrease is even more severe.
The graph above now shows 20 consecutive monthly falls, with the current number representing new PL claims over the preceding 12 months standing at 62,988. This is a fall of 1.3% over January.
Over the last 12 months the decrease on this basis has been 11.6%
In the case of EL, there was a small decrease of 0.3% from the number seen in January. There have now been falls in 12 of the last 14 months, to the current level which assessed over the preceding 12 months now stands at 49,573.
Over the last 12 months the overall decrease on this measurement has been 6.6%, less of a decrease than not only the other casualty portals, but also the comparative RTA figure which as we have seen is currently 7.8%.
EL disease claims
With EL disease there have now been 14 consecutive monthly falls, 3.2% over the last month. The current number representing new EL portal disease claims now stands at 10,511.
Over the last 12 months this number has fallen by as much as 51.2%.
There has been an upturn in retention rates in all three casualty portals over the last two months, though the extent of it is not unique as the graph shows: there have been other similar month on month increases.
But the effect of the data from the last two months produces only a limited upwards movement on the casualty data when the following graph is considered showing the data on a rolling 12 month basis: see the data shown by the lines on right hand side of the graph.
Both the two retention rate graphs now show "retained claims" as including cases proceeding to stage 3 of the process. If we had defined retained claims as excluding those claims proceeding to stage 3 then the RTA retention rate would, for example, have fallen from the 51% shown on the last graph above to 43%.
In the same way this alternative definition of retained claims would have had a more marginal effect in the case of the 12 month cumulative retention rates in the casualty portals: PL would fall from 25% to 23%, EL from 18% to 17%, and EL disease from 6% to 5%.
In the case of all four portals the rate of settlement at stage 2 is decreasing. This is primarily due to a combination of a decreased intake of new claims together with an increased use of stage 3.
The number of RTA claims settling at stage 2 fell on a monthly basis by 5.2% to 14,695. Apart from the low level of settled claims which we saw in December, this is the lowest number of stage 2 settlements since the early days of this portal.
The current number of RTA stage 2 settlements is 12.2% below the 2016 monthly average of 16,735.
The above graph shows a combination of PL and EL accident volumes only.
In the case of PL stage 2 settlements, the monthly number rose by 4.2% to 600. But this in turn was less than the 2016 monthly average of 616 by 3.6%.
As to EL, the monthly number for February fell slightly by 0.9% to 660. This was 2.9% below the 2016 monthly average of 680.
EL disease data continues to suffer from low usage especially in the later stages of the portal processes. In February there were 60 stage 2 settlements, a fall of 4.8% over the preceding month. This was also 17.8% below the 2016 monthly average of 73.
RTA stage 3 usage and settlement levels
In February 5,725 RTA claims proceeded to stage 3 by having court packs prepared. This does not show a continuation of the existing and progressively increasing trend towards use of stage 3 but may be a misleading statistic as the factors apparently justifying use of stage 3 remain in place.
Apart from the figure for December 2016, this in fact is the lowest level we have seen since May 2016. We should see whether there is a return to the pre-existing trend next month.
The average settlement last month was £2,760, a £13 increase over January, and apart from the exceptional month of October 2016 when £2,851 was reached as an average, the highest level ever achieved to date.
Taking the November 2015 level as a benchmark, shortly after publication of the 13th edition of the Judicial College Guidelines, we are now seeing average RTA settlements at 7.5% above that level.
Casualty stage 3 usage and settlement levels
Increased usage of stage 3 continues to be seen in both PL and EL.
In PL in February, 64 cases went that far, as opposed to a 2016 monthly average of 56.
With EL, 63 cases went to stage 3 last month, an increase over the 2016 monthly average of 50.
The data on EL disease is too small to be significant, but in February 3 cases went to stage 3 compared to 3.6 representing a monthly average for last year.
The average settlement offer for PSLA last month was £3,943 for PL, which is 3.5% above what we saw in November 2015 shortly after the latest Judicial College Guidelines were published.
For EL it was £4,071, which is 5.7% over the November 2015 figure.
In the case of EL disease, on the same small sample, the level in February was £3,846, which is 3.8% below the November 2015 level into which little can be read.
Measuring the increased use of stage 3
This new graph shows the current prospect of an existing portal claim which is in the process at stage 2 being moved into stage 3, and the trend towards increasing use of stage 3 which has taken place over the last four years.
In the case of an RTA claim, four years ago less than 5% of settlements needed to proceed to stage 3, from which it follows that over 95% were at stage 2. The current position is that nearly 30% of RTA claims are proceeding to stage 3.
The same tendency is taking hold in the PL and EL portals, but more slowly, and at present at least, less significantly. At present, around 10% of PL and EL claims which settle do so at stage 3, the other 90% or so do so at stage 2.
The availability of the additional legal costs available for succeeding at stage 3 are recognised to be a clear potentially significant factor, and may also explain the difference seen between RTA on the one hand and EL/PL on the other.
The stage 3 costs including for advocacy at an oral hearing are £500 for RTA, EL and PL claims. Looking at a claim worth under £10,000, the stage 1 and 2 costs though are of course different, at £500 for RTA and £900 for EL and for PL.
In other words, the value of success at stage 3 in terms of an uplift on the stage 1 and 2 costs is 100% in terms of RTA, but only 55% for EL and PL claims. It may be this factor which explains the difference in the data representing the different types of claim on the last graph.
The latest quarterly data showing volumes of claims issued in the county courts in Q4 2016 have just been released by the MoJ and it is worth looking at the data showing levels of claims for personal injury, though the MoJ do not in this quarterly release give any information regarding the type of the injury claims issued, nor the quantum of those claims.
The provisional figure for Q4 2016 is 32,077, which is the lowest quarter since Q2 2014 which stood at 30,819. It is 14.0% below the corresponding quarter in 2015, Q4.
The annual data over the years shown above has been as follows:
2012 146,644 issued claims
2013 146,687 issued claims, an increase of 0.3% over 2012
2014 131,441 issued claims, a decrease of 10.4% from 2013
2015 142,724 issued claims, an increase of 8.6% over 2014
2016 133,877 issued claims, a decrease of 6.2% from 2015
The majority of issued injury claims will inevitably tend to be lower value, though at least some impact will have been experienced as a result of the significantly increased court fees which were introduced as at 9 March 2015 and affected all claims with a value of over £10,000 with the new increased fee being 5% of the claimed value.
While the 2015 issued volumes showed no falling off, those increased court fees, together with the market changes which no doubt stand behind the reduced volumes into the portal already described earlier in this note, are likely to be the cause of the lower levels of litigation seen in injury claims in 2016.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.