The government has sprung a shock on the personal injury sector by ditching plans for further reform of the whiplash claims process.

The Ministry of Justice today responded officially to part two of its Reforming the Soft Tissue Injury Claims Process consultation, which closed more than five years ago. Part one related to the small claims limit for PI claims and to a fixed compensation tariff for RTA cases, and these measures were implemented in May 2021.

Part two was much wider in scope, taking in the issue of referrals and qualified one-way costs shifting, credit hire and rehabilitation arrangements. It had been expected that the PI sector would have to brace itself for further reform, but the MoJ revealed today that it will allow the market to deal with issues around fraud and claims costs.

The government also said it will not push ahead with proposals to force personal injury lawyers to identify referral sources for all claims.

The potential addition to the claim notification form had been in the pipeline since 2016, when the government accepted a recommendation from the insurance fraud taskforce to bring more transparency to the claims process.

But the idea has been dropped following last year’s implementation of the new process for low-value RTA claims, with the Ministry of Justice vowing to monitor the issue but take no further action. The majority of the 466 respondents to the whiplash consultation had opposed the naming of referrers, arguing that sources were confidential and that the information could lead to insurers unfairly targeting certain companies or dismissing claims because they came from a particular source.

The whiplash consultation had asked whether QOCS provisions should be amended so a claimant needed the court’s permission to discontinue less than 28 days before trial. This was shelved after stakeholders offered no clear agreement on what should happen, and the Civil Justice Council asked for more detailed consultation.

Insurers had hoped that credit hire and rehabilitation costs would be addressed by the government, but there appears no appetite to intervene. On credit hire, the MoJ said that in the past five years the industry has worked to reinforce and revise the voluntary general terms of agreement. Many operators, it was noted, have developed their own streamlined agreements to reduce credit hire costs.

Concerns had been raised from across the PI sector that rehabilitation was being factored into all claims, regardless of whether treatment was needed. The government proposed a voucher scheme to limit the number of sessions to those that were needed, but this idea had ‘limited support’ from consultation responses. There was also little enthusiasm for allowing defendants to arrange and pay for all rehabilitation, and even less for removing compensation altogether.

The government will continue to look into the issue and will support the development of an industry-wide rehabilitation code.

Responding to the announcement, Matthew Maxwell Scott, executive director of the Association of Consumer Support Organisations, said: ‘A sector so used to often damaging upheaval will be giving a sigh of relief that the government has decided against any further changes.

‘Quite why this response took five years to emerge is anyone’s guess, though the serious challenges officials are currently experiencing with the operation of the new claims portal may go some way to explaining the delay.’

Peter Gomes, interim chief executive of trade body the Credit Hire Organisation, added: ‘Credit hire companies are facing significant challenges as a result of the pandemic, Brexit and associated supply chain issues, and further market intervention from the government at this time would have been a serious concern, especially as the whole claims industry continues to grapple with the most recent set of reforms on whiplash and have further changes to absorb with regard to reform to the fixed recoverable costs regime.’