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The proposed changes to the current Personal Injury (PI) claims regime outlined in the Chancellor’s Autumn Statement, continue to raise questions amongst industry commentators.
While there may be delays in industry consultation and doubts over whether the proposals will be implemented fully, there is no doubt that an increase in the Small Claims Court limit will shift the responsibility for funding the pursuit of significant numbers of RTA PI claims from the at-fault party to claimants, and their legal expenses insurers.
The implementation of any increase, likely to be anywhere between 8 and 18 months away, will limit the costs and disbursements recoverable from the at-fault party, resulting in clear cost implications. So what’s the likely impact on Motor LEI claims run by panel and non-panel firms?
Based on the MOJ rates currently recoverable from at-fault parties, in excess of 90% of claims run by our panel solicitors would fall within the proposed small claims court limit of £5,000. Assuming solicitors charge LEI insurers at the same level of current fixed recoverable costs, the average cost per claim will rise from a few pounds to over £600 pounds per claim.
The Statement also suggested the full removal of entitlement to compensation for soft tissue injuries arising from a road traffic accident (RTA). The consequence of this is that less than 10% of current RTA PI cases would continue to hold entitlement to compensation.
Whatever changes are finally implemented, there will be pricing and coverage implications. Arc Legal therefore, anticipate Motor LEI products to be developed, with potential for at least three different operating models. These may include: –
a fully indemnified model, where the policy would provide cover for solicitor’s costs to pursue the policyholder’s claim;
permanent removal of cover for small claims court cases, leaving the customer exposed to Damages Based Agreements or Conditional Fee Arrangements with solicitors;
a part indemnified ‘self-service’ that would allow the customer to submit the claim themselves.
Arc Legal will work with clients to ensure the value of legal expenses cover is maintained following these changes. To obtain a copy of Arc Legal’s full response to the proposed changes to the Personal Injury claims system, please contact your account manager.