Standardisation will speed up claims as well as reduce legal fees

The Ministry of Justice has agreed the new fixed costs for low-value motor claims as it seeks to streamline the system and cut down on legal bills.

Justice minister Michael Wills sent a letter to stakeholders last week, which said the costs had been agreed by the Civil Justice Council.

The development was welcomed by the insurance industry, but the ABI called for the new framework to be extended to liability claims.

The agreed fixed costs are:

  • £400 for stage 1 (the claimant’s solicitor completes the claim notification form and sends it to the insurer, who may admit/deny liability);
  • £800 for stage 2 (where liability is admitted, the claimant obtains a medical report and the process continues with offers and negotiation of a settlement to a strict timetable); and
  • £250 paper hearing or £500 oral hearing for stage 3 (where the parties cannot agree a settlement and the case goes to court).

The reforms, announced earlier this year, are set to be introduced in April 2010.

The new system will apply to personal injury claims valued between £1,000 and £10,000 in damages; around 80% of all motor personal injury claims.

As well as speeding up claims, the new process will reduce unnecessary legal costs by setting a fixed cost for each stage of the process. Standardised electronic claim forms will enable key decisions to be made more quickly and reduce duplication.

Challenging new timelines have been built into the process to ensure much quicker compensation payments, with liability decisions to be made within 15 days rather than three months.

The ABI’s director of general insurance and health, Nick Starling, said: “The ABI has long argued for a simpler, more streamlined compensation system that works in the interests of consumers, so we completely support today’s announcement.

“This new process will cut down on delays, and reduce the high legal costs that are paid for through motor insurance premiums.

“It is now vital that employees injured at work have the same opportunity as those injured on our roads to benefit from this new process, so we call on the government to extend it to cover employers’ liability insurance claims.”