UK Personal Injury Litigation 2016; The turbulent course of market-changing reform continues

Table Of Contents
EXECUTIVE SUMMARY
The turbulent course of market-changing reform continues
A post-LASPO landscape is emerging, three years after implementation
Proposed government reforms would have a game-changing impact
Claimant representatives are facing further radical structural change
The next 12 months will be pivotal
THE PERSONAL INJURY CLAIMS MARKET
The personal injury sector has had a turbulent 15 months
The post-LASPO landscape is emerging
Claims numbers are falling following a surge in the build-up to LASPO
Claims numbers have yet to drop significantly below pre-LASPO levels
LASPO created a shift in personal injury claims that has yet to fully play out
The focus of claimant representatives away from motor led to sharp increases in EL and clinical negligence claims
Return to growth for motor claims in 2015-16, while EL and PL claims fall
LASPO has had a mixed impact on the market
The banning of referral fees is felt to have had little impact
Civil justice reforms have reduced costs
The impact of cost reduction on the ability of claimant representatives to take forward EL and PL claims is unclear
Proposed government reforms would have a game-changing impact on the sector
Proposals would increase the small claims track limit and remove general damages for minor soft tissue injuries
Key questions and uncertainty remain about the coverage of incoming reform
Political issues and the contentious nature of the reforms add to the uncertainty
Stark differences of opinion exist, although reforms are likely to be watered down
The reforms will reportedly save motor insurers an estimated £1bn a year
Announced reforms could have a wide-ranging impact
The reforms may have unintended consequences
Restructure of market participants: CMCs are likely to capture a greater share of the market
Claims inflation could be an unintended consequence of the reforms
Access to justice could fall to contentious levels
The market may see a spike in claims numbers following any reforms
Changes may push increased claims in other areas
Raising the small claims track limit: "old wine in new bottles" vs. market-changing impact
Removing general damages: the real game-changer
The CMC sector is facing further radical structural change
There was a sharp decline in CMCs post-LASPO
Before the end of 2015 the market was showing signs of stabilizing
Uncertainties surrounding the Autumn Budget reforms and future regulation have thrown the sector back into turmoil
The future for CMCs: contraction, diversification, and more regulation
Consolidation and diversification will increase
Revenue diversification will be key to survival
CMCs need to prepare for transfer of regulation to the FCA
Current regulatory priorities could have a more immediate impact on the sector
Tackling nuisance calls and unsolicited marketing would have a huge impact on the number of leads
Monitoring referral fee ban compliance will be complemented with the SRA's review
Tackling unauthorized activity, which may increase due to regulatory changes
Personal injury solicitors must prepare for tighter costs and a shifting landscape
Consolidation and contraction will result from the need for scale and efficiency
Fixed fees have led to a significant contraction in income
The need for scale and efficiency will segment the market
Slater and Gordon and Parabis provide insight into the issues of cost reduction and the likely future structure of the market
Significant restructuring is anticipated
The future of insurance company ABSs has been called into question
The SRA is likely to take more robust action and be handed greater fining powers
Fixed recoverable costs are likely to expand
The government expects urgent action on the Insurance Fraud Taskforce's recommendations
The Insurance Fraud Taskforce's final report was published in January 2016
The government accepts all the recommendations of the report and expects urgent action
The announcement of planned reforms overshadowed some of the work of the taskforce
Future claims trends: clinical negligence remains an area of concern
Clinical negligence claims have increased substantially since LASPO
Clinical negligence claims are estimated to have cost the NHS £1.4bn
Claims are expected to continue to rise, although the fixed fee regime may deter non-specialists
No other areas have yet risen to become the next NIHL or clinical negligence
PERSONAL INJURY CLAIMS: MOTOR INSURANCE
Motor personal injury claims have increased as the market has adjusted to LASPO
Motor personal injury claims rose for the first time in four years
There are signs the market has adjusted and stabilized
Claims settled still remain significantly above pre-LASPO levels
RTA casualties continue to fall, remaining at odds with claims numbers
Whiplash and fraudulent claims remain thorny issues for motor insurers, continuing to drive claims numbers
Whiplash claims account for up to 70% of motor personal injury claims numbers
Fraud remains a significant problem
Claims inflation has a greater impact on larger claims, but legal changes and reforms will drive increases at the smaller end
Claims inflation is rising at 11% a year for larger claims
Claims inflation for lower-value RTAs is more stable
Factors affecting future claims inflation
MedCo has had a bumpy start and faces a potentially uncertain future
MedCo was set up in April 2015 to improve medico-legal reporting for whiplash claims
The early review of MedCo sought to tackle the issue of MROs gaming the system
MedCo's future will depend on the government's proposed personal injury reforms
Proposed government reforms would affect motor insurance profitability
Any policy shift on general damages or small claims track would have a significant impact
The increase in the small claims track limit could affect 70-80% of motor personal injury claims
Legal costs could be reduced by up to 50%
Reforms could save up to 20% of personal injury claims costs
Savings of £40-50 a year are impossible without the removal of general damages
While reforms may lead to significant cost savings, they cannot be viewed in isolation
Premium rates have already returned to pre-LASPO levels
A surge in claims numbers in the build-up to any reforms could lead to levels higher than the pre-LASPO peak
Claims costs are likely to increase in other areas as a result of the reforms
The next 12 months will be a pivotal time for motor insurers
In the longer-term personal injury will be affected by vehicle technology, telematics, and driverless cars
PERSONAL INJURY CLAIMS: EMPLOYERS' LIABILITY
EL claims are finally decreasing
Disease claims continue to distort the picture, but claims have fallen in both sectors of EL
Although disease claims recorded are falling, NIHL continues to take its toll
Disease claims recorded peaked in 2013-14, driven by NIHL
The NIHL cash cow could be put out to pasture
Asbestosis and mesothelioma cases are largely stable and have not impacted claims numbers
NIHL continues to take its toll; claims settled are still sharply rising and recorded claims remain significantly above pre-LASPO levels
Accident claims are the only area to have fallen below pre-LASPO levels
Accident claims have dropped significantly since 2011-12
Injuries to employees, the underlying driver of EL accident claims, are in long-term decline
The Claims Portal is having limited success, particularly for disease claims, leading to calls for reform
Only 20% of disease claims are estimated to meet portal criteria
4% of disease claims and 12% of accident claims notified have been settled within the portal
Costs for the Diffuse Mesothelioma Payment Scheme will be impacted by claims inflation, not frequency
The scheme is expected to cost 28% more to run in 2015-16
While the value of awards is increasing, applications to the scheme appear to be flattening
Future issues for EL
The Mesothelioma (Amendment) Bill could place a further levy on EL insurers
Psychological and chronic back pain claims are yet to have any real impact
Wherever government reform lines are drawn, a seismic impact will be felt in EL
APPENDIX
Abbreviations and acronyms
Definitions
Claims Portal
DBAs
LASPO
MedCo
Bibliography
Further reading
About Verdict Financial
Disclaimer

List Of Tables
Table 1: Number of personal injury claims recorded and settled, by type, 2010-16
Table 2: Number and turnover of authorized personal injury CMCs, 2010-15
Table 3: Number of motor personal injury claims recorded and settled, 2010-16
Table 4: RTA casualties and motor traffic in Great Britain, 2005-14
Table 5: ABI average quarterly motor insurance premium, Q1 2012-Q1 2016
Table 6: Number of EL claims recorded, split by accident and disease, 2010-16
Table 7: Number of EL claims recorded and settled, 2010-16
Table 8: Number of EL claims recorded and settled, split by accident and disease, 2012-16
Table 9: Employer-reported fatal and non-fatal injuries to employees, 2010-15

List Of Figures
Figure 1: Important events in the personal injury market since 2015
Figure 2: Claims settled remain significantly above pre-LASPO levels
Figure 3: Motor claims maintain the lion's share of total cases
Figure 4: LASPO created a surge in non-motor claims
Figure 5: The potential impact of government reforms
Figure 6: While the number of personal injury CMCs has continued to fall, turnover increased in 2014-15
Figure 7: Current and future state of the CMC sector
Figure 8: Current priorities of the CMR
Figure 9: Clinical negligence claims have increased substantially since LASPO
Figure 10: A more stable LASPO landscape is emerging in motor personal injury, although claims settled remain significantly above pre-LASPO levels
Figure 11: Motor personal injury claims remain at odds with trends in RTA casualty data
Figure 12: Reforms would affect a significant proportion of motor claims
Figure 13: Claims costing up to £13,000 add £47 to the cost of an average policy
Figure 14: Premium rates have returned to levels seen pre-LASPO implementation
Figure 15: The rise and fall of disease claims recorded has dominated the EL sector
Figure 16: While EL disease claims recorded fell in 2015-16, claims settled continue to rise sharply
Figure 17: EL accident claims are significantly below pre-LASPO levels
Figure 18: Injuries to employees are in long-term decline

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