From 31 July 2013, major changes are taking place regarding personal injury claims.
These changes will have a significant impact on both the person bringing a personal injury claim and the personal injury solicitor.
Rest assured that here at Swain & Co, we are committed to embracing the changes and remain totally confident that we will continue to offer an extremely high level of service for all our personal injury clients.
At the same time, we feel it is important to inform you of the current position in terms of the major changes being made by the Government and the impact of these changes upon you if you are seeking personal injury compensation.
Turning firstly to Road Traffic Accidents (RTA), for nearly 3 years, these claims have been progressed through the “RTA portal”. The portal is a computer system designed to allow the personal injury solicitor to send claims directly to the insurance company of the person responsible for the accident.
From 31 July 2013, this will include RTA personal injury claims valued at up to £25,000; it is currently up to £10,000
From 31 July 2013, this system will be extended to include all personal injury claims – eg accidents at work or accidents in a public place.
Technology inevitably encourages development and solicitors who deal in personal injury claims will have no option other than to adapt quickly to this new system of communication.
But it does not stop there.
The Ministry of Justice who are responsible for this new system are also responsible for deciding how much the personal injury solicitors will get paid. This is known as “Fixed Costs”. So, it does not matter how much time the personal injury solicitor has spent in helping their client. The solicitor will get paid the same whether a small amount or large amount of work was required.
This is worrying because arguably, some firms may now look to cut corners so as to ensure they have to do the least amount of work possible on cases and perhaps will look to employ case handlers who are not appropriately qualified.
The “Fixed Costs” system will apply to all personal injury claims. Essentially, the system of “Fixed Costs” started with RTA cases. Due to pressure from the insurance industry, the Ministry of Justice have reduced the personal injury Solicitor’s costs from £1,200 to £500.
This is a significant cut and is justified, say the Ministry of Justice, because following recent legislation, “referral fees” are now not allowed. (A referral fee was a fee paid by some personal injury solicitors to a company who may have advertised on television to buy cases and could amount to around £700 per case.)
The Ministry of Justice argue that because solicitors no longer have to pay referral fees, they can now “afford” a reduction in fees.
But some firms never paid referral fees and yet we still have to deal with the reduction in Fixed Costs – slightly unfair to say the least.
Furthermore, the Ministry of Justice consider that “Fixed Costs” is an appropriate way for personal injury solicitors to be paid in respect of all other personal injury claims. Such claims are usually significantly more complicated than Road Traffic Accident claims and may involve complex legal issues.
However, in cases where liability is admitted, the personal injury Solicitor will be paid £900 (cases valued between £1,000 to £10,000) and £1,600 (cases valued between £10,000 to £25,000).
This will inevitably mean that the Solicitors may not be paid for all the work that was required in bringing their client’s personal injury claim to a successful conclusion.
It does not stop there either.
In April 2013, the Government also introduced changes to the No Win No Fee Agreements.
Before April 2013, the Defendant was responsible for the Success Fee of the person bringing the personal injury claim. The Success Fee is a percentage of costs charged by the claimant’s solicitor which represents the risk of taking a case on but not succeeding. If a claim is not successful, the claimant’s solicitor will not get paid); and for the cost of the Insurance Premium.
Since April 2013, both these costs have become the responsibility of the person seeking compensation for an accident that was not their fault.
This means that it can no longer be guaranteed that a person will receive 100% of their compensation as deductions for the Success Fee and Insurance Premium, where applicable, will usually apply.
One small crumb of comfort is that as from July 2013, the amount of compensation awarded should increase by 10% – BUT arguably this increase may be swallowed up by the Success Fee and the Insurance Premium cost.
It is widely known that these changes have been forced upon us by the insurance industry who claim that a vast amount of claims, road traffic accident claims in particular, are fraudulent and that consequently, motorists’ insurance premium have risen.
However, we are sceptical about whether we will see a reduction in motorists’ insurance premiums. Further, it begs the question as to the negative impact these changes will have on all honest RTA personal injury claimants and indeed, on all claimants in general whether an RTA claim or whether an accident at work, in a shop or in the street.
It is clear, however, that the insurance industry is on a mission.
Only last week, the Managing Director at Direct Line said it was “obvious” that car insurance premiums had fallen following reforms of legal costs. It is difficult to see how he has reached this conclusion since the reforms were only implemented in April 2013.
Worryingly, the insurance industry want to push further with regard to the amount of compensation awarded for whiplash claims. They are now demanding that the Government consider a new approach to the amount of compensation for low-level claims.
It is clear that these changes will have a significant impact on all personal injury claims. And not necessarily for the better.