Legal expenses provider Coplus calls on government to rethink its whiplash plans

The government is “using a sledgehammer to crack a nut” in its plans to tackle insurance fraud, according to Coplus operations director Jason Tripp.

Giving evidence to the House of Commons Justice Select Committee, Tripp said plans to raise the threshold for the small claims court and removing access to solicitors for personal injury claims under £5,000 risks penalising thousands of legitimate personal injury claimants.

“The government’s proposed reforms will have an unintended and very serious detrimental effect on the operation of the before the event (BTE) motor legal expenses insurance (MLEI) market and consequently customers’ access to justice,” he said.

He said the government had chosen a “one size fits all” approach to tackling the problem of claims management companies (CMCs) and insurance fraud and was in danger of destabilising the before the event market, which the FCA has said is useful to customers.

Tripp said that some 10 million customers have BTE MLEI, and that the proposed reforms are likely to increase costs by about £250m, which will be passed on to customers.

“The reforms cast doubt over the ability of BTE legal expenses insurer to provide legal advice,” he said, pointing out that the extra costs will drive customers into the arms of the CMCs.

“Legal expenses insurance will become less prevalent,” he said. “Customers are more likely to turn to CMCs, but that is unlikely to include legal advice.”

Tripp said the proposed reforms miss the target they are designed to tackle.

“The issue lies in the regulation and control of the CMCs,” he said.

Tripp recommended that the government ban cold calling by CMCs, ban marketing for personal injury claims, introduce a CMC approved persons regime similar to that operated by the FCA, and raise the small claims limit in line with inflation to only below £2,000, instead of the £5,000 limit currently proposed.

Justice minister Lord Keen told the committee that litigants in person (LIPs) would be able to navigate the small claims process once solicitors excluded.

The government plans to increase the small claims limit from £1,000 to £5,000 for motor claims and £2,000 for all other personal injury claims.

Keen told the committee that, while there will be more self-reprented claimants, the system will be changed to make it user-friendly.

Keen admitted to the MPs that he did not know how many fraudulent claims are made each year, but he predicted that the number of personal injury claims will fall once people “pause and think about the merits of their claim before they make it”.

He said claimants can turn to Citizens Advice Bureau for assistance, though he said the Ministry of Justice had not yet discussed this with the CAB.

Keen said that CMCs can look after claimants, and though some CMCs are “rogue”, “good” CMCs can substitute for BTE insurance.

“Good CMCs look after their customers and if the claims management companies move into this market, that can be extremely beneficial,” Keen said.

“Of course we are concerned about the behaviour of some rogue CMCs and we are increasing regulation in this area, but there is no reason to suggest that substituting some CMCs for BTE insurance is a bad thing.

‘It may mean CMCs come into part of the market they have not been in before – that is not in of itself a bad thing.’

Reacting to the committee hearing, Ageas chief executive Andy Watson expressed support for the government’s proposals.

“After an interval of 20 years it’s absolutely right that the government looks to increase the small claims track limit for personal injury, specifically to £5,000 for road traffic accidents claims and £2,000 for all other personal injury claims,” he said.

“Ageas believes the claimant must be at the heart of any planned change, with a process that is simple, transparent and easy to navigate. Regulation of the claims management sector by the FCA should be prioritised and must be a pre-requisite for anyone operating in this area.

“Well designed, and effectively implemented, legislative changes will reduce claims costs, and, all other factors remaining the same,  premium reductions will follow.”

Motor Accident Solicitors Society chair Simon Stanfield criticised the government’s plans to deprive personal injury claimants of legal representation. 

“It is extremely disappointing, but not surprising in the slightest, that the government continues not to listen and is formulating this major reform programme with little or no reliable data or evidence, instead basing it upon some historical assumptions about fraud, in particular from the ABI, that have long since been discredited by all sides in the debate,” he said.

”These reforms will have a very real impact upon hundreds of thousands of innocent accident victims every year and the government must have a better answer to some of the consequences than relying upon an already over-stretched charitable sector to support LIPs navigate a process that they will find complex and hoping that a re-energised CMC market can somehow be contained.”

Donna Scully, director of law firm Carpenters, said: “It is astonishing that after more than two years of debate, analysis and scrutiny, the Ministry of Justice still has little or no evidence of the supposed problems and few solutions to the issue of large numbers of LIPs and an expansion in CMCs that the reforms themselves will create.

”Seemingly oblivious to all the evidence that is available, ministers appear wedded to the largely outdated and discredited concepts that there is a claims culture, that many, if not most, road traffic accident personal injury claims are fraudulent, that accidents are falling – ask the Department for Transport about that one – and that LIPs will happily trot off to their local Citizens Advice Bureau for legal advice in their thousands.

”We can look forward to a future fantasy world post-reforms where motor insurance premiums will tumble down, when even insurers have acknowledged the reality is that premiums may not rise as much as they would increase them otherwise, and good CMCs will replace before the event insurance, without full consideration of how those CMCs will be paid, or that where proceedings are needed, the LIP will be a puppet operated by the CMC.

”MoJ appear proud that their reforms will have the effect of effectively denying access to justice to 90-95% of RTA PI claimants. For a government department that is supposed to protect the legal rights of our citizens, that is a shocking indictment.”