2022 personal injury forecast: trends and future risks

If 2021 was the year of the vaccine, 2022 looks set to be the year for recovery. COVID-19 forced businesses to embrace home working and, for many, the benefits of remote operating have changed attitudes towards work forever.

Workplace culture will continue to inform boardroom agendas in 2022, along with the long-tail impacts associated with the pandemic, such as long-COVID and continued periods of short-term absences. A drive towards environmental, social, and governance (ESG) metrics and strategies will similarly push employers' efforts to address physical and mental health in the workplace.

In addition to continuing pandemic impacts, the UK is facing a cost of living crisis. Energy bills are soaring, annual inflation is at a 30-year high and consumers are paying more for food, clothing and transport. All of these factors will impact consumer spending habits, damages awards for personal injury claims, along with an increased appetite to bring claims.

2021 was marked by ongoing tensions in the UK-EU relationship. The unfortunate reality is that 2022 does not offer much hope of a thawing in relations, with the Northern Ireland protocol remaining a continued source of dispute and the UK’s accession to the Lugano Convention having been kicked into the political long grass last year.

Following the UK Government’s announcement on 31 January 2022 that it would bring forward a new Brexit Freedoms Bill to make it easier to amend ‘retained EU law’ (REUL), 2022 may indeed be the year of former Brexit Minister Lord Frost’s call to “… amend, replace, or repeal all the REUL that is not right for the UK”.

Alongside regulatory and legal reform, digital transformation, remote justice and technology will continue to play a key role in the ongoing transformation of the UK justice system. However, the real challenge will now be to realise the benefit of a more long-term digitised justice system, and maintain the momentum once the UK adapts to the ‘new normal’ of hybrid or remote hearings.

Against this background, we highlight some key legal and regulatory developments, and provide an overview of 12 topics to watch under four main topic groups which insurers and corporates should consider as they plan for operational resilience in the new financial year.

‘Build back better’ was Prime Minister Boris Johnson’s policy pledge to transform the UK’s fortunes. As part of this campaign, the UK Government also committed to make the UK a safer place – from online safety to building safety and public safety.

We expect these trends to continue throughout 2022, along with a continued focus on the impact of, and recovery from the COVID-19 pandemic.

Following the European case of Vnuk v Zavarovalnica Triglav dd [2016], the Motor Insurers Bureau (MIB) was effectively required to meet claims for uninsured motor accidents occurring on private land.

On 21 June 2021, the Motor Vehicles (Compulsory Insurance) Bill was introduced to Parliament and is currently working its way through the House of Lords. The aim of the Bill is to remove the lasting effect of Vnuk and re-state the position under the Road Traffic Act 1988, where insurance policies are only required to cover the use of vehicles “on a road or other public place in Great Britain”.

On 29 January 2022, new rules, alongside revisions to existing rules of the Highway Code came into force, placing a higher burden of responsibility on those in charge of vehicles, particularly vehicles more likely to cause harm such as HGVs.

As part of the UK Government’s plans to place new and enhanced regulatory regimes for building safety, the Building Safety Bill represents a seismic shift in the regulation of every stage of a building, from design and construction to occupation. The new Building Safety Regulator will have power to prosecute offences or use civil penalties under the Bill against any business that breaks the rules and compromises public safety. Royal Assent is expected to be given no earlier than September/October 2022.

In a bid to make the UK “one of the safest places to be on the internet”, the UK Government has been working on a new piece of sweeping legislation, known as the Online Safety Bill. The Online Safety Bill authorises Ofcom as regulator to issue a fine of £18 million, or 10% of annual worldwide turnover (whichever is greater).

Continuing on the topic of safety, following consultation last year, Home Secretary Priti Patel announced in January 2022 that legislation will be introduced this year with the aim of striking the right balance between public safety and not placing excessive burden on small businesses. The Protect Duty, previously known as 'Martyn's Law', will be a new piece of anti-terrorism legislation with a wide reach. The Home Office estimates that 650,000 UK businesses could be affected by the new Duty.

For all businesses operating in the public arena, this development means they should develop or revisit their counter-terrorism measures, paying specific attention to how best to manage and mitigate the identified risks. This will in turn impact decisions businesses make about insurance cover… Preparedness is vital.

We have not seen an influx of COVID-19 claims to date because of the complexity of the causation issues. If, however, the UK Government attributes long-COVID to occupational cause then claimants and their lawyers will undoubtedly consider such a move as a lowering of the causation hurdle and claims will inevitably follow. Whilst we anticipate the attribution may be limited to those in front line professions, there is potential scope for claims to extend to local authorities and private care providers. Insurers and their insureds should be alert to this issue in 2022.

Key topics to watch in 2022

What does 2022 have in store for insurers and corporates in the personal injury arena? Here, we explore 12 trends under four main topic groups: Ongoing and future risks relating to the COVID-19 pandemic, the Post-Brexit landscape, Claims inflation and Civil justice reforms.

The COVID-19 pandemic has been a global health and economic crisis, resulting in severe disruption and an uncertain claims environment for insurers.

Injuries relating to lockdowns and working from home

As a consequence of working at home, we expect an influx of claims relating to musculoskeletal injuries, visual issues from excessive screen time and stress-related claims.

The Health and Safety Executive’s (HSE) December 2021 report on work-related stress, anxiety and depression, found that stress, anxiety and depression caused half of all work-related illness in the past 12 months. Naturally the HSE will be increasing its attention on how employers manage this increased stress in the workplace.

As life returns to a ‘new normal’, the claimants of the future may potentially be more vulnerable to adverse psychological consequences as a result of the impact of the pandemic on their long-term mental health. As such, compensators may find themselves exposed to claims inflation resulting from the pandemic. 

In a similar vein, emerging claims such as those relating to COVID-19 anxiety syndrome and ‘injury to feeling’ claims resulting from the ‘policing’ of COVID-19 related non-compliance, are likely to be tested within the courts. If defendants settle initial claims in an effort to save costs, this could have a floodgate effect, resulting in an overall greater spend.

Global approaches to long-COVID: an occupational disease?

A number of countries in Europe, as well as Canada and South Africa, have formally recognised long-COVID as an occupational disease, setting up compensation schemes for key workers, including those in the health industry.

Last year, the All Party Parliamentary Group on Coronavirus proposed that the UK should adopt the same approach. If accepted, this may be an indication of the beginning of a new breed of civil claims which may extend to future enforcement action by regulatory authorities, such as the Health and Safety Executive.

Fraud remains in the spotlight

In November 2021, the Public Accounts Committee (PAC) published a report detailing the cost of fraud and error for the Department for Work and Pensions (DWP). According to their report, the cost of fraud and error for the DWP during the pandemic was £8.3 billion (or 7.5% of the DWP expenditure).

Fraudsters attack (and thrive on) weak process. The scale of the process, and the range of users that a process needs to account for, will inevitably create more opportunities for fraudsters to exploit.

Furthermore, the pressure on any process created by a surge in demand or new/emerging risks will significantly increase the challenge of fraud prevention. For the DWP, the nature of the challenge posed by the pandemic created a surge in claims that put more pressure on those processes. This additional pressure inevitably exposed more weaknesses.

More recently, the UK Government continues to come under pressure as it denies that it has written off £4.3bn of fraud losses relating to COVID-19 business support loans.

The UK COVID-19 Public Inquiry

2022 will see the Rt Hon Baroness Heather Hallett DBE as Chair of the forthcoming Public Inquiry into the COVID-19 pandemic, which is likely to be one of the most complex undertaken in legal history.

It is understood that some NHS Trusts have already been notified that they should start preparing to respond to the inquiry as they may be considered a ‘Core Participant’. Other organisations such as care homes, government departments, education settings, general practitioners, small businesses and transport providers may also be included.

It is likely that any lessons to be learnt or changes in public policy, or indeed legislation, will take months if not years to be implemented.

Brexit continues to play an undeniable role in shaping our legal system for the future. Will 2022 be the year the UK accedes to the Lugano Convention? On the domestic front, along with The Motor Vehicles (Compulsory Insurance) Bill working its way through Parliament, 2022 is set to bring a review of retained EU law which is likely to have far-reaching consequences for those advising on English law.

Will the UK join the Lugano club?

On 22 June 2021, the European Commission “representing the European Union” wrote to the Swiss Federal Council as the depositary of the Lugano Convention to say that “the EU is not in a position to give its consent to invite the United Kingdom to accede to the Lugano Convention”.

Since then, the UK Government has expressed concern that it has not received an indication as to when to expect a final decision on the UK’s application.

Meanwhile, on 16 July 2021, the European Commission recommended that the EU sign up to the Hague Judgments Convention 2019 (HJC), which is designed to provide a framework for the enforcement of judgments across different jurisdictions. However, the HJC excludes “the carriage of passengers and goods” from its scope and therefore, brings into question whether claims for damages brought by those injured in road traffic accidents, on ships, planes or trains would be covered.

A substantive review of retained EU law

To mark the second anniversary of ‘Getting Brexit Done’, on 31 January 2022 the UK Government announced that it would bring forward a new Brexit Freedoms Bill to make it easier to amend retained EU law, that is EU-derived legislation, rights and principles preserved at the end of the Brexit transition period under the European Union (Withdrawal) Act 2018 (EUWA).

The Rome II Regulation (Rome II) is an example of retained EU law which provides a framework to allow the courts to decide what the applicable law is when injury arises out of non-contractual obligations.

Although the Government has previously stated an intention to retain the core principles underpinning Rome II, which would probably suit many litigants, the application of this regulation has not been completely straightforward. The scope of the review exercise is not yet clear; nor is when it will be undertaken.

The impact of claims inflation on the personal injury space continues to be far-reaching and significant, with an ever-increasing number of influencing factors. This has been heightened by the economic hardship associated with the pandemic – much of which remains and will continue to be felt for months, if not years to come.

In addition to continuing pandemic impacts, the UK is facing a cost of living crisis. Energy bills are soaring, annual inflation is at a 30 year high and consumers are paying more for food, clothing and transport. All of these factors will impact consumer spending habits, damages awards for personal injury claims, along with an increased  appetite to bring claims.

Care costs (often the largest element of a claim for serious injury) are rising. This is as a result of hourly rate increases, driven by a shrinking labour supply as a result of Brexit, COVID-19 vaccination requirements and by additional pandemic overheads, such as PPE.

As well as the ongoing impact of the pandemic on the way in which dispute resolution is conducted, and litigation arising from the Official Injury Claim (OIC) portal, one of the most significant developments expected this year is the extension of the fixed recoverable costs regime.

With a newly announced discount in Northern Ireland, and the discount rates in Scotland, Northern Ireland and England & Wales expected to be reviewed by the end of 2024, insurers should turn their attention to whether they need to allow for a change in the methodology and estimation of the rates within their reserves.

Remote justice

In November 2021, Kennedys responded to the UK Ministry of Justice’s Call for Evidence on the future of dispute resolution in England & Wales, highlighting that technology has the potential to resolve disputes on a more efficient, humanised, simpler and inclusive basis.

Progression of access to remote justice and technological advancements in dispute resolution will assist the UK in establishing itself as a modern, resilient legal system.

Continuing the theme of open justice, from Spring 2022 thousands of court and tribunal judgments will be available via The National Archives for the first time, increasing transparency and securing free access for all.

On 15 November 2021, the Civil Justice Council (CJC) published an interim report for consultation on the role pre-action protocols (PAPs) should play in an increasingly digitalised justice system. The report canvasses a number of reform options, including making all PAPs available online via portals, formally recognising that compliance with PAPs should be mandatory, along with requiring parties to complete a joint stocktake report/list of issues as a final step before the start of proceedings. The report also discusses strengthening the management of pre-issue disclosure. The CJC Working Group will draft a final report for consideration by the CJC, likely in the Spring of 2022.

Discount rates

It is important for insurers and compensators to consider what impact different rates and approaches to setting the rate may have on pricing risk, and whether localised pricing reflects the outcome sufficiently.

The discount rate in England and Wales is currently -0.25%. The UK Government has said it will revisit the rate every five years, at most. The next rate review must start by 14 July 2024 at the latest and finish by no later than 10 January 2025 (180 days thereafter).

Whilst this may seem a long time, many personal injury claims and in particular, catastrophic injury claims, can have significant life spans and therefore can expect to settle on a future discount rate.

In Northern Ireland, rather than allowing the Damages (Return on Investment) Bill to pass through the Assembly as planned (before setting the rate), on 25 March 2021, the department proposed that secondary legislation should be used to change the discount rate under the Wells v Wells [1998] framework, and introduced an amended discount rate from +2.5% to –1.75% from 31 May 2021. 

The Northern Ireland Damages (Return on Investment) Bill received Royal Assent on 2 February 2022, and on 21 March 2022 the Department of Justice confirmed that a new discount rate of -1.5% would come into effect on 22 March 2022. This will result in Northern Ireland continuing to have the lowest discount rate in the UK.

This will be disappointing news for insurers and compensators, many of whom predicted the new rate would be -0.75% in line with the rate in Scotland.

The next review of the rate will be in July 2024.

Fixed recoverable costs

In September 2021, the UK Ministry of Justice confirmed that fixed recoverable costs (FRCs) will be introduced in the fast track for most civil cases worth up to £25,000. The fast track will also be extended (rather than the creation of a new separate intermediate track as originally thought) to include ‘intermediate’ cases valued between £25,000 and £100,000.

The new rules will include a greater emphasis on penalising delays in the resolution of cases. The Government will implement an uplift of 35% of FRC where Part 36 offers are beaten, and further, there will also be a 50% uplift on fixed costs where a party has engaged in ‘unreasonable behaviour’.

Based on the CPRC minutes from November 2021, it appears that October 2022 is when the extension of fixed costs should take effect. Will this deadline be met? Only time will tell.

The last discount rate review in England and Wales promised a consultation regarding dual rates, where a lower rate applies in the short term and a higher rate in the longer term. That alternative model offers various potential advantages, including to help protect the position of short term claimants with less opportunity to mitigate investment risks over a longer period. We would encourage a consultation on dual rates in England and Wales sooner rather than later, in good time for the next review deadlines.
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2022 insurance industry forecast: trends and future risks

2021 saw the insurance industry grapple with a multitude of challenges. Here, we look forward to 2022 and the key legal and regulatory developments across 10 business critical topics.
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