In a surprise announcement during the recent Autumn Budget, the Chancellor George Osborne announced plans to increase the small claims limit for personal injury claims to £5,000 as opposed to the current £1,000. He claims that the increase to the small claims limit will save the average motorist £40 a year on their insurance premium. I should mention that he hasn’t said whether the savings takes into account the recent 50% increase to the tax motorists must pay for their premiums.
The consequence of having a claim which falls within the small claims limit is that a claimant is unable to recover any legal costs. This means that anyone who needs to seek compensation for their losses must do so without the benefit of legal advice.
The changes to the small claims limit is to prevent those who suffer more minor injuries from making a claim but from my perspective this seems to defeat the purpose of having insurance. Whiplash may seem like a minor injury but it is an injury which causes an innocent party financial loss. For some of our clients, the situation is made worse by fact that they are self-employed and have to struggle with no income during their recovery, except perhaps a nominal amount of benefits to which they may be entitled.
I have, in the past, met with clients who have been called directly by the other driver’s insurers and offered a cheque immediately following an accident. In both instances, following our involvement, the claims were settled for more money than the insurers had offered. Inevitably, with more people being forced to represent themselves, insurers will be able to take advantage of claimants by settling their claims for substantially less than they are worth.
In the past few years, there have been a number of changes to the way in which whiplash claims are run. The legal costs a claimant is entitled to recover have been lowered to a fixed amount regardless of how much work has been involved. Medical reports which are needed to ascertain the extent of a claimant’s injuries (and identify potential complications in the future) have been subject to a fixed fee. More recently, solicitors have been given access to a database which shows any previous personal injury claims that a client has made. The purpose of this database is to help us identify fraudulent claims before they are sent to an insurer and therefore avoid wasting their time and money. Despite all of these changes, I have yet to hear of any substantial savings being passed directly onto motorists. Whether the new changes really will equate to a saving of £40 per year remains to be seen.
For further information, please contact a member of our Accidents Claims team.