“I never think of the future. It comes soon enough” - Albert Einstein
As the market charts a course through 2024, can we accurately predict the outcome of key impact events affecting claims management in the low value motor personal injury claims space? And what will their effect be on operations and indemnity spend for compensators?
Without the proverbial crystal ball, making predictions is challenging but we can at least address the issue in the context of the following emerging risks to ongoing market stability:
There remains a strong argument for an official shift away from RPI as a measure of inflation and towards CPI as the most reliable measure, with economic inflation indices for December 2023 evidencing CPI at 4% and CPIH (which also accounts for housing costs) at 4.2%.
Irrespective of which index is most appropriate the effect of economic inflation will present frictional issues for 2024, with potentially the most severe being the publication of the 17th edition of JCG, the statutory review of the whiplash tariffs, and the pending Supreme Court decision in the appeal test cases of Rabot and Briggs.
We can stress test these future events in the context of ongoing uncertainty in the sub £25,000 motor personal injury claims space but first we need to examine their probable outcomes.
Expected from spring 2024, the effect of economic inflation on injury valuation bandings even for minor injuries is likely to be significant. There remains a debate over whether the correct inflationary index to be applied should be RPI, as the government no longer reports RPI as a formal measure of economic inflation and, arguably, CPI is a more reliable measure. However the Judicial College has recently indicated in response to market lobbying that the application of RPI is likely to continue unless there is judicial intervention at an appellate level which, even if there is market appetite to challenge it, will be too late for this JCG edition.
Therefore, if RPI is used for an index, an inflation calculation from September 2021 to November 2023 shows an overall uprating of 22.6% such that arguably the broad inflation increments for JCG 17th edition could be around this percentage, if not higher. An average inflation increase of 20% uplifts the minor injury bandings in chapter 14 to <7 days at £828, <28 days at £1,644 and < 3 months at £2,940, which influences the valuation for damages for pain, suffering and loss of amenity for a non-whiplash injury where there is a concurrent whiplash injury as well. Combined with the valuation methodology determined by the Court of Appeal in the test cases of Rabot and Briggs, with the Supreme Court’s take on this awaited, we can see that the review may impact settlement strategy and churn for mixed injury claims presented in the RTA Small Claims Protocol and OIC portal as well as litigation tolerance.
Quantifying that impact is difficult but compensators should be considering their current lead indicators – settlement strategies and valuation calibrations – in readiness to counter the effects of a significant rise in JCG minor injury valuation bandings and the overspill into chapter 7 orthopaedic injuries.
The Civil Liability Act 2018 provides the statutory authority for a mandatory review of the tariff amounts – at the earliest, three years from the date of their introduction. An area of uncertainty surrounds the mechanics of the review: it is unclear whether the new tariffs will apply retrospectively to existing claims in the low value injury claims servicing portals (and other injury claims that include a whiplash injury) or whether the application will run from the accident date. There is a strong argument for the latter when accounting for the implementation of the whiplash reforms, which was by accident date, and the fixed recoverable costs extension for personal injury claims also by accident date, although it is by no means certain that this will be the outcome.
The present tariffs were built with an element of futureproofing, withCPI economic inflation predicted at about 11%. Arguably, this attempt to futureproof the tariff levels for ongoing inflation has not been successful due to the economic inflation trajectory which saw the 11% component eroded within the first 12 months of the whiplash reforms due to high inflation. The same futureproofing for economic inflation will likely apply to the new tariffs but if the government and independent forecasters no longer recognise RPI as an official designation, then why would it be used to uprate the tariff amounts? Further, as the intention of the whiplash tariffs is to intentionally reduce the amount of compensation for a whiplash injury and avoid a common law approach to assessing the same, then why would a strict inflation uprating be applied to them?
The call for evidence from the MOJ has now landed as part of the tariffs review; claimant stakeholders are likely to push for tariff increases that are in step with inflation or close to it, but the counterarguments set out here are persuasive in terms of how far the review should realistically go. Either way a report will be laid before parliament by the end of May this year.
Our drawn down data demonstrates a presentation rate for concurrent whiplash and non-whiplash injury profiles supported in medical reports for settled claims in the OIC portal at approximately 51%. When outstanding claims at stage 2 of the same portal are included this rate of presentation increases to between approximately 65% and 70%. Our same data sources when drawn down for whiplash claims presented in the MOJ portal the month before the whiplash reforms came online demonstrated a presentation rate of approximately 35% – almost half the present proportion, which speaks volumes.
Although this is not yet the predicted industrialisation of mixed injury claims profiles, it is evidence of an upward trend even when distinguishing between primary and secondary routes to market and funding channels such as legal expenses, insurance and damages-based agreements.
Injury severity underlying this presentation rate is also ticking up with our benchmarking data evidencing for Q3 2023 an average whiplash prognosis of 6.37 months and an average non-whiplash prognosis of 4.35 months. Presentation of specific injury types set out in medical reports shows increasing frequency and severity by recovery period as well. For instance, our data sources show the top injury specific types outlined in medical reports to be:
We expect a further uptick in injury severity as frequency of OIC portal settlements increases in Q1 2024 with a potential knock-on effect on indemnity spend accruals. However, it is positive to note that compensators continue to report strong settlement churn at stage 2 of the OIC portal, with primary market opponents based on the calibration of digital valuation tools for non-whiplash injuries.
Listed for 20th February, it is difficult to predict the judicial outcome of these cases, which is leading to market uncertainty. However, this can be caveated by the continued frequency of claims settlements at stage 2 of the OIC portal. It is likely that the judgment may be handed down just a few months after the publication of JCG 17th edition and the setting of new whiplash tariffs, with these three consecutive events impacting open claims profiles, negotiation and settlement strategies on the portals as well leading to a possible re-emergence of unsighted claims stock and new claims notifications.
We argue that economic inflationary increments alone present a strong lobbying position for an increase in 2024. Valuation and complexity issues driven by mixed injury profiles present another strong case for an increase, but the economic inflation argument is most persuasive. Why should any increase not be in step with the appropriate inflation index (CPI) and be incremental?
Indeed, only secondary legislation is required to effect any increase implemented by statutory instrument and amendments to the Civil Procedure Rules to maintain the equilibrium between non-cost bearing and cost bearing claims, which is currently about 77% to 23%. Without a limit rise this mix may well be disrupted, leading to claims deterioration in the OIC portal and a notifications frequency uptick in the MOJ portal. Although as yet unquantified, the compensator market must remain closely aligned to this risk and its potential effect on indemnity spend with MOJ optimisation strategies coming to the fore once again.
However, we do expect strong counter-lobbying from claimant stakeholders as the whiplash reforms have delivered suppressed claims notification frequency. Add in the scenario of a changing political landscape in the autumn of this year, including the possibility of a new government who may not see a review as an imminent priority, and we may not see any review until 2025.
2024 may well deliver some claims displacement evidenced by OIC portal deterioration, a frequency uptick in claims submissions in the MOJ portal, and the possible industrialisation of injury severity presentations – all potentially driving a negative effect on indemnity spend accruals and the whiplash reforms ‘savings’ to be passed on to consumer. This risk is likely to be greater in respect of secondary market opponents who may augment or adjust their business models to push claims over £5,000 by gaming whiplash prognoses and triaging for multiple additional injuries. Therefore, compensators must continue to deploy existing strategies that challenge causation and mechanism of injury to negate any adverse effects.
If the Supreme Court endorses the majority view of the Court of Appeal, then the valuation methodology will remain the same, with a similar impact on mixed injury claims, but it is not yet possible to predict the decision of the Supreme Court. All these impacts need to be tempered with the likelihood that, in respect of primary market, opponents’ business models may not change significantly (if at all) in respect of ‘churn’ settlement strategies in the OIC portal.
At this stage, monitoring the position, keeping a close watching brief, and examining lead data indicators to predict claims deterioration and displacement is the best way forward for compensators as we work in partnership through 2024, ready to devise mitigation strategies to counter any downstream effects on operational claims handling and indemnity spend.
Director of Strategy - Motor Personal Injury
The service you deliver is integral to the success of your business. With the right technology, we can help you to heighten your customer experience, improve underwriting performance, and streamline processes.