Chancellor vows to raise the small claims limit for personal injury claims and scrap general damages for whiplash injuries.

The headlines from the Autumn Statement and Spending Review may have focused primarily on reducing budget deficits and postponing reductions on Tax Credits; however one piece of news that was delivered by Chancellor, George  Osborne, may have significant repercussions for future personal injury claimants. Mr Osborne pledged to raise the small claims limit for personal injury claims to £5,000 and scrap general damages for ‘minor’ soft tissue injuries.

The Chancellor announced that he would remove legal costs by transferring personal injury claims of up to £5,000 to the small claims court and that he also intends to end the right to claim cash compensation for ‘minor’ whiplash injuries. Unsurprisingly these announcements were met with both surprise and dismay by personal injury lawyers.

Delivering his statement to the House of Commons, Mr Osborne said:

“We’re going to bring forward reforms to the compensation culture around minor motor-accident injuries.”

“This will remove over £1bn from the cost of providing motor insurance. We expect the industry to pass on this saving, so motorists see an average saving of £40-50 per year off their insurance bills.”

The Chancellor also added that the government is ‘determined’ to crack down on the fraud and claims culture in motor insurance:

“Whiplash claims cost the country £2bn a year, an average of £90 per motor insurance policy, which is out of all proportion to any genuine injury suffered.”

The government previously opted not to increase the small claims limit for personal injury claims from £1,000 to £5,000 in 2013 after being warned against the move by a report of the transport select committee. However, after lobbying by the Insurance Industry the government now clearly feels the time is ripe for change. Mr Osborne stated that consultation on the proposed changes will begin in the new year.

The Motor Insurance Industry welcomed the news. Huw Evans, director general of the Association of British Insurers, said:

“This is a significant breakthrough in tackling the compensation culture and is good news for motorists. Insurers have long called for meaningful reform in reducing costs in the compensation system, including increasing the small claims track limit.”

“Previous government reforms have already led to insurers passing on over £1bn in savings to motorists through lower premiums, and in a highly competitive motor insurance market, insurers will continue to pass on savings to customers.”

Personal Injury lawyers, however, greeted the news with scepticism. Jonathan Wheeler, president of the Association of Personal Injury Lawyers, said the insurance industry had shown a ‘callous indifference’ to the suffering of victims, and had failed in the past to live up to promises to pass on savings from reforms to customers. He also contradicted the reports that whiplash injuries were rising year-on-year, saying that since the overhaul of medical reporting and the establishment of a portal for claims, whiplash claims have fallen by more than a third:

“Only two years ago the government ruled out increasing the small claims court limit because there were no adequate safeguards to protect genuine claimants. There are still no adequate safeguards.”

“If the small claims court limit is raised to £5,000 all that will happen is that genuine victims of injury will not be able to afford the legal help they need to bring genuine claims and there will be an epidemic of cold calling from claims management companies as they rush to take advantage of vulnerable people who won’t be able to afford legal representation.”

Sue Brown, chair of the Motor Accident Solicitors Society, was also equally scathing about the proposals adding that the NHS and benefits system will be left to pick up the bills currently met by insurers:

‘A substantial increase in the small claims limit and the removal of the right to claim general damages for low value whiplash will have a hugely detrimental impact on the ability of accident victims to seek redress and justice,” she said.

“It cannot be right to deal with the purported compensation culture by removing the right to claim compensation from those who suffer injury as a result of negligent driving, in order that the insurers for the negligent driver can save money.”

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