The claimant sector faces a £1bn loss from the government’s reform of the personal injury sector – while insurers are set for net benefits of more than £200m, according to official estimates.
The Ministry of Justice impact assessment, published alongside the consultation on the soft tissue injury claims process yesterday, states that insurers will be assumed to pass on 85% of savings from the reforms to consumers.
This would equate to a total of £1.1bn cut from the cost of motor premiums if all the proposals come into force, although consumers would be paying an extra £189m for increased before-the-event insurance.
Insurers would save £136m if damages are fixed at £400 for injuries lasting six months, and £143m if the cap applies to injuries lasting up to nine months.
The introduction of a fixed tariff system for more serious injuries is expected to net defendant insurers at least £52m a year, while they can expect a net saving of £63m from the increase in the small claims limit. The total cost to claimants is calculated through claims receiving less in damages and claims not being pursued.
The impact assessment states that those who provide services, including lawyers, medical experts and claims management companies, are assumed to be able to find ‘alternative activities of equal economic value’.
The MoJ says 702,000 RTA-related personal injury claims were made in 2014/15, of which 523,000 related to a soft tissue injury that received a financial settlement. Claimants currently have legal representation in 99% of RTA claims cases.
Around 36% of RTA claims related to an injury duration of six months and so would be subject to a damages cap. The MoJ estimates claimant lawyers will incur a loss of revenue of £20m a year based on the 127,000 claims that would no longer proceed. Medical experts and medical reporting organisations stand to lose £23m a year.
For individuals no longer able to claim for damages, the NHS would not be able to recover the costs of any treatment from the at-fault insurer: total cost is set at £9m a year. HM Revenue and Customs is also set to lose around £65m a year in missed VAT and insurance premium tax.