Life after whiplash – what would the world look like?

22 January 2016

As more information has filtered through from the MoJ it increasingly looks like the announcements in the Chancellor’s Autumn Statement are more a statement of intent than an idea that will be consulted on. Let’s remember that other recent reforms appear to at best have had consultations in name only with decisions appearing to  have been made before hand.

Look at the Governments response to the rather hasty petition that was launched, and their use of language.

Small claims – Government respond to petition

Also consider some of the answers to direct questions from the claimant lobby .

When APIL met the MoJ

So let’s assume the ABI wins again, what could the post whiplash world look like?

Satellite Litigation

I would put my mortgage on it. If whiplash is banned the definition will almost certainly be challenged by innovative lawyers, probably from the North West or the Wild West as we like to call it. Innocent RTA victims will suddenly develop different types of injuries that the lawyers say fall outside the definition.

Claims management company representation

If there are no injuries to be claimed then the CMC market also has to adapt. With no claims to refer, sorry recommend, to lawyers, they will have to earn their money from actually managing claims and offering a service to the customer. Some do that already I accept, for example the BTE market but outside of that many do not.

Small PI firms in run off

There are hundreds if not thousands of SME law firms who rely heavily, or in some cases entirely, on PI income. If the owners of those firms are say 55 or over, possibly approaching retirement it would not surprise me if they simply go into to run off. Stop all marketing spend, maximise cash and move on. This of course plays into the hands of the bigger firms who can operate on lower margins due to economies of scale.

Insurers close offices and make more money

If there are less claims and those claims are less complex you don’t needs armies of skilled claims staff. I would predict rationalisation of those operating models and more outsourcing and possibly off shoring to cut costs and boost profits and shareholder value.

Defendant law firms hit hard again

LASPO caused huge job losses in the defendant sector. These changes will hit home even harder. If there are no claims to defend, insurance companies don’t need lawyers. Simple supply and demand.

With no damages for whiplash, arguments about low speed impact will surely disappear. Also 99% of all RTA fraud cases relate to whiplash or low value claims, again they would all but disappear taking the industry back to work levels seen 25 years ago before the terms “claims farming” or “compensation culture” had even been thought of. The only logical outcome is mass consolidation of that market as firms concentrate on bigger ticket disputes and cut overheads.

The true cost of insurance doesn’t change

Whilst Mr Osborne would have us believe that each household will save £50.00 per annum on motor insurance is that realistic? I don’t think so. The insurance world operates in cycles depending upon market capacity and investment returns. I accept claims costs are relevant, especially if other returns are low, but are they as relevant as is being suggested? Also an inevitable consequence of these reforms is an increase in the cost of ATE & BTE cover so what you gain with one hand you lose with the other.

Routes to market even more vital for lawyers

If a market place shrinks then it will be a case of survival of the fittest and by that I mean who has the best route to market. I would argue that there is no true law firm brand in the consumer market at present. There are legal brands such as NAH & IL4U which are very much in the consumer consciousness but little else. When you look how long it has taken and how much has been invested to create these brands you wonder if a law firm alone could ever achieve the same. Good quality work will still be out there, it is now a case of making sure you can attract it.

Lawyer v Lawyer

We are already seeing this with firms setting up teams to challenge what they see as under settlements by other law firms. As lawyers look for the next opportunity this is inevitably something that will be explored further particularly if Claimants represent themselves and are encouraged to settle low by the Third Party Insurer.

Insurers look for the next battle ground

Once whiplash has gone what will be the next door the ABI can try and close? They have had a go at credit hire and lost, but that won’t deter them, they will come again. NIHL is very much in the cross hairs and no doubt other diseases will be considered for the fixed fee Portal environment especially with all the capacity that will be created if whiplash goes.

As I said in my previous article

The small claims limit & whiplash debate

the only way to oppose this is to be creative about compromises and concentrate on the economic realities and consequences  of the proposals.

Without question a big battle ahead for the claimant lobby in 2016!