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Civil Liability Bill moves forwards to Committee Stage though tweaking may be needed while annual CRU stats confirm RTA claims downturn

Summary

This year the DWP reverted to their previous practice of April being the month for publishing the CRU data for the year ending 31 March, the headline from which is a fall of over 100,000 in the number of new RTA claims made.

 

Co-incidentally publication happened to be the day before the Second Reading debate of the Civil Liability Bill took place in the House of Lords during yesterday afternoon and evening and unsurprisingly the new figures were quoted either in terms of the extent of the decrease, or by reference to the fact that the numbers remained high when a historical comparison was made.

 

The Bill was given its Second Reading and is due to be considered in Committee in the Lords on 10 May. The speeches made yesterday suggest that while the government remains firmly committed to its intended reform both on whiplash and the discount rate, it may see the need to listen to the views expressed by peers yesterday and to tweak the Bill on both issues so as to ensure it will pass through that House.

 

If that happens, the essential question will be whether the Bill as revised will be able to achieve the government's policy aims of creating meaningful savings in motor premiums and reducing the demands on the public purse.

The CRU Data

We will look at the key messages from the data below, but we first consider yesterday's parliamentary debate.

The use of statistics in the debate

The explanatory notes to the Bill had of course been prepared on the basis of the most up to date CRU data then available which showed 780,000 RTA claims in 2016/17, making the point that this was 50% higher than in 2006/07 when they had stood at 520,000, despite a reduction in the number of RTAs and increased safety measures in vehicles.

By yesterday of course peers had the 2017/18 CRU data showing a reduction in RTA claims of 130,000 to 650,000. Lord Keen for the government accepted the new figure, but pointed out that it was still 40% or 200,000 more than in 2005/06. He also made continued use of the 2016/17 level saying that there were around 670,000 whiplash claims that year, reaching this figure by assuming that 85% of RTA claims were for whiplash, so 780,000 x 85% = 663,000.

Lord Beecham the Labour spokesman took a contrary line referring to a reduction in RTA claims of 14% since 2013, and by 10% in the last year. He said without setting out the maths that last year saw the lowest number of claims relative to the number of vehicles on the road since 2008.

The cross-bencher the Earl of Kinnoull declared his insurance industry work as an interest in the debate, though made use of it by recalling how in meeting with Munich Re who were considering pulling back from the UK motor market, he had his leg pulled by them on whiplash with them referring to it as "the British disease".

Lord Keen in winding up maintained a firm line despite the new claims reduction in 2017/18 and the suggestion from Lord Beecham that matters might have turned. He reasonably preferred a longer term view. There was, he said, "a very obvious and clear trend" in the development of whiplash claims which had been going on for more than 10 years. He suggested that government might have acted sooner, "but act we must and that is what we intend to do".

Use of primary or secondary legislation for whiplash reform?

It is clear after the debate that the principal issue for the MoJ to now consider in the lead up to the Committee Stage is whether to move what was intended to be in secondary legislation regarding the fuller definition of what constitutes whiplash injury, as well as the proposed tariff itself, from regulations into the Bill itself.

Last Friday, encouraged it seems by a letter from MASS, the Lords Delegated Powers Committee took a contrary approach to the government's preferred approach of dealing with those 2 issues in regulations rather than in the Bill, the government's stated aim being to allow flexibility of future response when required.

The committee called the Bill "skeletal" in terms of content, and criticised both those issues being kept out of the Bill and the full parliamentary process surrounding it. They noted the distinct advantage as they saw it of the provisions on both these issues being debated in the fuller way that a Bill allowed which was amenable to amendment, while on the other hand statutory instruments which would be used to bring in regulations would not be.

In a hard-hitting assessment, the committee saw the Bill as drafted leading to the position that whiplash injury would mean "whatever the Lord Chancellor says it will mean", while the position with the tariff would be no different: it would be "whatever the Lord Chancellor says it will be".

Predictably, these points featured strongly in the debate, with a number of peers putting the government under pressure to follow the committee's lead.

In winding up, Lord Keen said that government did not "entirely agree" with the committee's recommendations, but would consider providing more within the Bill on both issues. We will see what transpires but it would not be surprising if changes to the Bill were made to cover this argument, but at the end of the day the question of what is included in the Bill and what is in SIs need not affect the delivery of reform.

Other whiplash issues

As usual, the Second Reading debate highlights matters likely to be raised in committee as to ways it may be proposed the Bill should be amended. The thrust of the debate seemed generally supportive of the need for whiplash reform (albeit with some reluctance in the case of Labour and the Lib Dems), but opponents are likely to seek to make changes which would water down its impact. These issues are likely to resurface in Committee:

  • It will be said that the tariff is too low and that the figures should be raised
  • It will be argued that including whiplash lasting 2 years within the tariff is too long a period and so too serious an injury
  • While not directly part of the Bill, the argument will be put that £3,000 rather than £5,000 is more suitable as an RTA SCT limit
  • It will be said that a body such as the Judicial College should have a role in setting the level of the tariff which would effectively increase it
  • The position of vulnerable road users including pedestrians and cyclists will be raised and it may be suggested that their claims should be excluded from the SCT RTA rise to £5,000

The point was raised in debate that the Bill would leave those involved in RTA claims and specifically those suffering whiplash injuries being treated differently from those injured in other circumstances. Lord Keen accepted this, but "that is because we have to address a particular mischief".

Discount rate issues

Part 2 of the Bill dealing with the reform of the discount rate was also dealt with in debate yesterday. While not without a degree of controversy, the parliamentary passage so far suggests that as expected it will be easier to achieve than whiplash reform.

Reference was made to the discount rate in other jurisdictions. Both Lord Keen for the government and the Earl of Kinnoull were making the comparison. Those highlighted were Germany at 4%, Spain at 3.5%, France at 1.2% and Ireland at 1% or 1.5% (both figures being quoted).

While the need to cater for the needs of claimants with devastating injuries was recognised, the government desire to achieve a fair discount rate taking account of competing interests and avoiding overcompensation seemed to be generally recognised.

There was emphasis in the debate more in relation to the review process and how it should be carried out. A number of peers supported 5 year rather than 3 year reviews, Lord Faulks from the coalface of handling claims reported that there was already evidence of gaming the system with the position as it now stood, which he thought would be reduced with 5 year reviews.

Lord Sharkey raised the possibility of a system similar to that used with setting the Bank of England's Base Rate by its Monetary Policy Committee following monthly meetings, while Lord Marks raised the alternative of the expert panel meeting annually or every two years to decide whether the rate needed changing.

In winding up, Lord Keen said that the MoJ would be open to discussing the 5 year suggestion, or Lord Marks' proposal of regular expert panel meetings further. Those discussions are likely to start prior to the Committee Stage. The switch to 5 years but maintaining the intended process otherwise would be less of a change but would demonstrate flexibility.

Timing of first discount rate review

The timing of the process concerned peers, especially that of the first review.  Lord Faulks suggested that the initial 90 day period could be reduced to 30 days.

As to the first review, Lord Keen was of the same mind that speed was important. He said they were (perhaps optimistically it should be said) aiming for April 2019 for implementation of a new rate post the review process rather than some point in 2020 as Lord Sharkey had suggested.

He would be taking further advice from officials as to question of how far the government could go with setting up the machinery in place for the swift appointment of an expert panel prior to the Bill getting Royal Assent.

And so onto the CRU data

Total volumes of new claims

The total number of claims recorded by the CRU and therefore of claims involving personal injury fell by 125,201 or by 12.8%, from 978,816 to 853,615.

Prior to this year's data we had seen 4 previous years of decline. But the extent of those annual falls before this year's had been limited as the list below demonstrates:

  • 2012/13 to 2014/14 – 3.0%
  • 2013/14 to 2014/15 – 1.8%
  • 2014/15 to 2015/16 – 1.7%
  • 2015/16 to 2016/17 – 0.3%
  • 2017/17 to 2017/18 – 12.8%

So we had 3 years of increases followed by now 5 years of decline.

The average annual total over the last 6 years now stands at 979,537, within touching distance of the 1 million level.

The reason for this year's fall in the overall claims data is entirely associated with a corresponding reduction in RTA claims to which we now turn.

Volumes of new RTA claims

Over the last 2 years we had seen increases each of 1.2%. Prior to that there had been 3 consecutive annual decreases of 1.2%, 1.4% and 5.6%.

We need to look back for longer term trends. This year's level was last seen in the 2008/09 to 2009/10 period.

The current level is still though 164% of the 2000/05 annual average of 395,735.

The average over the last 6 years including 2017/18 now stands at 759,032 which is 192% of the 2000/05 average. Not quite double the earlier level, but close to it.

Comparison with RTA portal data

We saw earlier this month that in terms of the RTA portal, in 2017/18 there was a 12.2% reduction from the 2016/17 level, or a drop of 97,059.

Comparing the CRU data with that from the portal, the CRU annual decrease is 4.5% more, or in numerical terms around 33,000 greater.

In terms of the numbers, the portal result was just over 700,000 at 700,008, so the CRU figure at 650,019 is 7.1% or 49,989 lower.

As to a comparison between the levels of the 2 sets of data, in both 2010/11 and 2011/12, there were more RTA claims reported to the CRU than entered the portal. This was clearly due to the portal acquiring maturity as claims began entering it during its first 2 years.

Since then, the difference between the 2 sets of data has been measured by reference to the extent to which more RTA claims enter the portal than are reported to the CRU. The annual differences over the last 4 years have been as follows in terms of the higher portal figures:

RTA claims

 

Portal   claims

CRU   claims

Difference

2017/18

700,008

650,019

49,989

2016/17

795,803

780,324

15,479

2015/16

857,416

770,791

86,625

2014/15

856,212

761,878

94,334

It is clear that more new claims are recognised by the portal than are reported to the CRU though the reasons for this and the fluctuations in the data from year to year are poorly understood. One possibility is a double counting of portal claims, such as where submitted by more than one firm of solicitors. There must be others including an overlooking of the need to report a claim to the CRU.

The monthly issuing of MI by the portal and its earlier availability during this month had enabled us to anticipate where the CRU figures might come in, though in fact the CRU decline is larger than expected.

Though the fall on the CRU method of calculation (16.7%) may attract the headlines, it should be recognised that the portal data is also a suitable alternative set of MI, and where the difference between the DWP data and that from the portal is higher than ever before, it may be the case that this year the DWP figures are overstating the true rate of decline which may be nearer to 12.2% than 16.7%.

This point has some support for the fall in the level of settled RTA claims as the following graph shows. The fall from 755,366 to 683,329 is of the order of 72,037 or 9.5%, little over half of the 16.7% reduction in new RTA claims as measured by the CRU.

Volumes of new EL and PL claims

The position is different when PL and EL claims numbers are compared with each other.

PL claims

Following 3 consecutive years of decline, in 2017/18 there was an increase of 10,563 or 12.4%. In fact PL claims were the only category to show an increase last year.

The current level is within 8.4% of the 2011/12 peak so a further annual increase of the size seen this year would result in the previous record year being exceeded.

EL claims

It should be remembered that unlike the portal MI, the CRU annual release does not distinguish between EL accident and EL disease, so this makes it more difficult to compare EL portal data with the EL numbers from the CRU.

As far as the CRU EL figures are concerned there was a fall from 2016/17 of 4,125 or 5.6%. This was the 4th consecutive annual decrease.

The current level is as much as 34.2% below the 2013/14 peak and the extent of the gap is currently growing.

Comparison with casualty portal data

PL claims

The better comparison is for PL claims, as PL claims data is kept separately by both the CRU and the portal.

This table shows a comparison as between the 2 sets of data over recent years:

PL claims

 

CRU   claims

Portal   claims

Difference

2017/18

96,067

58,221

37,846

2016/17

85,504

62,987

22,517

2015/16

92,709

70,262

22,447

2014/15

100,072

76,996   

23,076

We saw how with the RTA claims data that the portal numbers were higher than those from the CRU. The opposite is the case with PL claims: more are submitted to the CRU than the portal. One factor may be that there is an element of claims are being double counted because they are being reported to the CRU by more than one compensator to a greater extent in the case of PL than with RTA claims. Additionally, more PL claims may fall within exclusions to that portal than RTA claims will stand to be be excluded from the RTA portal.

The extent of the variation between the 2 sources was similar between the 3 previous years at around 23,000 until 2017/18 when it rose to nearly 38,000.

EL claims

The comparison is more difficult not only because the separate portal data for EL accident and EL disease need to be added together to contrast with the CRU data, but also because a high proportion of disease claims especially multi-defendant ones are excluded from the EL disease portal. The position is also complicated by different practices taken by insurers as to whether to report low level hearing loss claims to the CRU.

The comparative position is therefore similar to the position with PL, namely there are more CRU claims than portal claims. There was a greater difference in 2014/15 when NIHL claims were more prevalent, while since then including 2017/18 the position has been stable with a difference of around 14,000 each year.

EL Claims

 

CRU   claims

Portal   claims (EL)

Portal claims (ELD)

Total   portal claims

Difference

2017/18

69,230

45,785

8,605

54,390

14,840

2016/17

73,355

49,604

10,345

59,949

13,406

2015/16

86,495

52,493

19,972

72,465 

14,030

2014/15

103,401

52,120

19,998

72,118 

31,283

DWP recoveries

These stand at £123.5m in 2017/18, a reduction of £2.5m from the previous year and a continuation of an ongoing pattern of reducing levels. The proportionate breakdown as between the various claims types remains generally unchanged.

Regards

Contact

For more information please contact Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.law

By Simon Denyer

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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.

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