The Impact of the Civil Liability Act 2018 – the Whiplash Reforms
If you sell Motor Legal Expenses Insurance (MLEI) to your customers, then here is a straightforward view of what you need to know about the whiplash reforms which happened on May 31st 2021.
First some context – What are the changes brought in by the Civil Liability Act 2018 – effective May 31st 2021?
The reforms are designed to reduce the number and cost to at fault insurers of road traffic accident (RTA) whiplash related claims.
The main changes are:
- The previous Small Claims Court cap of £1,000 on Injury Claims is now increased to £5,000. In most instances if your customer succeeds in obtaining compensation within the £5,000 limit the at fault insurer will no longer pay your customer’s legal fees incurred in pursuing an RTA Personal Injury Claim.
- A newly developed tariff system now dictates the amount awarded for Whiplash Injuries not exceeding 2 years. The prescribed amounts represent significant reductions for each given injury that a claimant might expect under the former system. The tariffs do not apply to non-whiplash injuries, which will continue to be valued in line with judicial guidelines.
- Claims for injury not exceeding £5,000 or with an overall value of not more than £10,000 (including injury but excluding insurers’ subrogated outlays and credit repair/hire charges) are made through the new Official Injury Claims (OIC) Portal.
Do the whiplash reforms affect all Motor Legal Expenses claims?
Although there are exemptions for ‘vulnerable road users’, pedestrians, cyclists, motorcyclists and mobility scooter riders; ‘protected parties’ including children and in cases involving an at fault driver driving a foreign registered vehicle, the new legislation applies to England and Wales and will adversely affect the vast majority of RTA Personal Injury Claims. The financial burden of paying your customers’ legal fees incurred in pursuing a successful RTA Personal Injury Claim has shifted from the at fault Motor Insurer to your customers’ MLEI Provider or if your customer’s MLEI does not have RTA Small Claims PI cover for claims below £5,000, the financial burden rests with your customer personally.
What is the impact of the reforms be on Motor Legal Expenses Insurance?
The reforms will adversely impact on the price of the policy. Due to the recoverability of costs being removed in the vast majority of claims, the handling costs of these claims need to be funded by the customer’s legal expenses insurance policy, thus pushing the price of these types of policy up significantly. MLEI with Small Claims PI cover will pay your customer’s legal fees incurred in pursuing a successful RTA Personal Injury Claim but at a greatly increased cost to you.
It’s also vitally important to note that any policy sold prior to the 31st May might not be fit for purpose in the sense that since the policy would have been designed under the former legislation your customer may well not have legal fees cover for a RTA Small Personal Injury Claims if the accident happened after 31st May 2021. Consequently, your customers could be in a situation where their insurance cover is inadequate in light of the reforms.
The New Official Injury Claims (OIC) Portal
All injury claims below £5,000 are handled by the Official Injury Claim Portal, a new Government backed service which aims to simplify the personal injury claim process enabling individuals themselves to pursue compensation claims for injuries against an at fault third party. It is in fact a complex system backed up by a volume of legal rules and procedures which are far from easily understood by the man in the street. Whilst the system is to be designed to be used by individuals, it does not provide in itself any form of legal assistance for a claimant, meaning your customers do not receive the expert advice and representation provided by a lawyer acting on their behalf when pursuing their case under a Motor Legal Expenses policy. MLEI can pay for this representation for your customers so to manage their personal injury claims on their behalf. Lexelle and our Group Solicitors PM Law anticipate that 90% of all personal injury claims will now be managed by the OIC Portal where there is no real opportunity for your customers to recover their Solicitor legal costs from the at fault party but with the appropriate cover from Lexelle your customers’ Motor Legal Expenses insurance policy will meet this cost.
What should we do in light of these changes?
First of all, it would seem only sensible to review current policy wording and identify any customers who may be in a position where their cover could be inadequate in the event of a claim. As the vendor, you may wish to advise them of the situation and choose to offer a policy adjustment or replacement which Lexelle together with our Group Solicitors PM Law can assist you with.
The main thing to look for is whether the Motor Legal Expenses policy wording contains a Small Claims Track exclusion – if it does, this means approximately 90% of your policyholders will not be able to use their Motor Legal Expenses policy wording to pursue a Personal Injury claim.
Going forward, all Motor Legal Expenses providers are adjusting their premiums as a result of these legislative changes and it is highly likely the prices are increasing significantly. Similarly, there may be changes in service provision which may impact on customer satisfaction.
What can Lexelle offer?
Lexelle offers new Motor Legal Protection Insurance policy wordings that accommodate the legislative changes. We have a range of cover options that can be designed to suit you and your end client profile.
Most importantly, though, we’ve been in business since 1996 and have developed very close, professional working relationships with a range of partners, including our Group legal advisers PM Law. By focussing on the provision of a full service, rather than just a policy, we are uniquely efficient. We are confident that we can provide you with highly competitive rates exactly because we have a streamlined service to offer your clients in the event of a claim.
On a free to you but confidential consultative basis Lexelle welcomes the opportunity to:
- Review your current Motor Legal Expenses offering
- Advise on and offer solutions to any deficiencies
- Discuss cover enhancements that may be suitable for your customers
- Provide you with costings to use our products and services going forward
Why not pick up the phone today? Call our Group Head of Sales on 07874 628028