An impact assessment on the new PI reforms says lawyers could lose out on up to £81m per year, while insurers can expect a huge benefit of over £1bn
Claimant lawyers could be set to miss out on approximately £81m in revenue per year as soon as the new reforms come into force, reports the Law Society Gazette.
The Government introduced the Civil Liability Bill to parliament on Tuesday. It included tariffs for RTA claims alongside a new £5,000 small claims limit.
The next day, the Ministry of Justice published an impact assessment (IA) for the Bill.
It calculates that around claimant lawyers will lose around £32m per year from claims that will no longer proceed, and a further £49m from claims where legal representation is no longer allowed.
Both measures would effectively take lawyers out of the system. Costs will no longer be recoverable and damages payments will be significantly reduced.
’It has been assumed that the loss in revenue will be offset by a reduction in the work conducted,” say the impact assessment. “Therefore, it has been assumed that claimant lawyers would be able to redirect their resources for productive uses elsewhere in the economy.”
Meanwhile, the IA predicts defendant insurers can expect an overall total benefit of around £1.3bn per year.
This is from reduced claims numbers and smaller damages payments.
It is, however, believed that 85% of these benefits will be passed onto the consumer. This leaves insurers with a net windfall of around £190m per year.
The government hopes the new reforms will ease the burden on the small claims court, as more of the claims will proceed without lawyers. It is expected the percentage of claimants without representation will increase from 5% to 30% after the reforms come in.
But PI lawyers have previously warned that the reforms could wipe them out.
Brett Dixon, president of the Association of Personal Injury Lawyers (APIL) said:
“There are no surprises in the impact assessment. It is obvious that these reforms will rob Peter to pay Paul. The cost of personal injury claims has already fallen 21% since 2013 and this Bill will save many more millions of pounds for insurers while people injured by their policyholders must accept arbitrary sums in recompense.
”A fixed tariff will inevitably mean people with genuine injuries are under-compensated. The impact assessment does not account for the human costs of these reforms which are directly at odds with the fundamental purpose of compulsory motor insurance”.
The reforms are expected to affect 96% of whiplash claims. It is due to be read in the House of Lords on 24 April.