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Curbing the whiplash epidemic

Published by Cherry Chan on

Holly Deakin contributed to the writing of this blog

According to recent newspaper articles the UK is branded the 'whiplash capital of the world'. If this is true, what is being done to curb the 'whiplash epidemic'? In this blog we analyse the proposals being put forward to tackle this assertion.

Background

A medical definition of whiplash is ‘damage to the ligaments and tendons in the neck caused by vigorous movement of the head'. Road accidents account for the majority of whiplash cases, and most whiplash will recover by itself. The table below displays the proportion of personal injury accidents that result in whiplash claims, taken from the Association of British Insurers (ABI).  

  2007/8 2008/9 2009/10 2010/11 2011/12 2012/13

Number of personal injury claims from road traffic accidents

551,905 625,072 674,997 790,999 828,489 819,137

Number of whiplash claims from road traffic accidents

430,000 482,297 514,816 566,998 542,922 476,938
% whiplash 78% 77% 76% 72% 66% 58%

Source: Figures from the Transport Committee 1Whiplash claims in 2007-2008 is from the ABI 2.

Despite the average cost of a whiplash claim being relatively small (around £2,400 for the average pay-out) the combined cost to the industry is significant. The ABI estimates that UK insurers received 1,200 whiplash claims every day, which accumulates to a total worth of £2bn per year. Although much of this £2bn is legitimate compensation for injury, it is unclear how many whiplash claims are fraudulent or exaggerated.

Proposals for reform

The proposals to try to reduce the burden of whiplash claims can be grouped into three categories: increasing accuracy of claims reporting, reducing the number of claims, and reducing the cost of claims.

The Government is currently considering introducing an independent panel of medical experts to assess whiplash claims and report to the Courts. In addition, the Government is considering introducing a standardised medical report, with an option for doctors to record the extent of the certainty (or uncertainty) of their diagnosis. This should make it easier for courts to assess claims. Each of these may increase accuracy, reducing the number of fraudulent and exaggerated claims and streamlining the claims process. However, there would be an initial cost to setting these up.

“The Government is currently considering introducing an independent panel of medical experts to assess whiplash claims and report to the Courts.”

Currently a major cost to insurers is the cost of challenging claims they deem to be fraudulent or exaggerated. A reform which has been proposed a number of times by the insurance industry is to increase the threshold for the Small Claims Court from £1,000 to £5,000. As it stands, most whiplash claims are above the current threshold and are therefore moved to the ‘Fast Track.’ In this court, costs of both sides are borne by the loser. This dis-incentivises insurance companies from challenging claims unless they think they are certain to win. Under the proposed reform, any claim for damages under £5,000 (the majority of whiplash claims fall into this category) would instead be dealt with by the Small Claims Court. This would reduce lawyers’ fees, as Small Claims are often self-represented, and are presided over by a District Judge. The Government has, however, considered and rejected this idea in the past, on the basis that it would impair fairness.

A significant reform that the Government has introduced is around the role of personal injury lawyers. We all know about ‘no-win no-fee’ personal injury lawyers due to their heavy TV advertising. Two reforms have come into effect recently. The first is that referral fees are now banned. This means that money can’t be given (e.g. to doctors or insurers) in exchange for referring a case to a personal injury lawyer. This change should reduce the number of cases which involve such lawyers. The second reform is around the no-win no-fee contract. In April 2013, the success fee in personal injury cases was limited to 25% of general damages and past losses, and was made payable by the winning party. This should significantly reduce the cost to insurers of whiplash claims.

Whiplash prevention

A different approach for the Government to take would be to try and reduce the number of genuine whiplash incidents. Progress has been made recently in the area of driver and passenger safety. A recent study showed that improvements in the design of head restraints in some modern cars reduce the chance of whiplash injury by 37-55% 3. One proposal was to encourage car sellers to show new car owners how to adjust their head restraints appropriately. Another proposal, is to place an emphasis in learner drivers’ training to avoid tail-gating, since most whiplash incidents are caused by low-speed rear-end collisions.

Some proposals have been mooted by insurers themselves. Recently Aviva proposed compensating all short-term minor injuries with rehabilitation only, regardless of whether the customer is at fault. Removing cash compensation would (they estimate) reduce the current £2bn cost by £900m. Under this proposal, there would be fewer costly challenges, and the claimant would be given help in recovering from their injuries. There is an obvious downside to this from the claimant’s perspective. Compensation is awarded on the consideration of ‘Pain, Suffering and Loss of Amenity’. Rehabilitation would only help with some of these.

Conclusion

Many of these proposals have merit, and although some are concerned about the role of the insurance industry in the reforms, the Government seems able to judge and rule fairly on the effect of these on claimants. Additionally, the insurance industry has pledged to pass on any reduction in their costs to customers through reduced premiums. These proposals should go some way towards addressing the current large number and cost of whiplash claims, although they may take some years to come into effect.

1 http://www.parliament.uk/business/committees/committees-a-z/commons-select/transport-committee/news/whiplash-report/

Tackling Whiplash, Prevention, Care, Compensation, 2008, ABI, page 1

http://www.tandfonline.com/doi/pdf/10.1080/15389580309867#.U-IAT01OX4U

About the author

  • Cherry Chan

    Cherry advises a range of UK general (re)insurance companies and international captives on actuarial issues including statutory reserve reviews, reinsurance and insurance programme optimisation and Solvency II implementations. She also acts as Actuarial Function to a number of clients.

    View Biography

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