Official Injury Claim and Fraud – “removing” the financial incentive
In this post, we provide our initial thoughts on one of the primary objectives of the whiplash reforms - to remove financial incentive as a way to prevent fraudulent low value claims.
The MoJ in November 2016 set out the purpose of the reforms:
Package of measures to disincentivise minor, exaggerated and fraudulent road traffic accident related soft-tissue injury claims.
The primary way to achieve this is by removing the financial incentive for those enabling claims.
We are now five months post-launch of the OIC and our data shows there are 190 distinct legal representatives taking on the challenge of the OIC. That is 190 firms with a business model they feel offers sufficient financial reward to pursue low value whiplash injury for their clients, likely facilitated by Damage Based Agreements.
The vast majority of the 190 have no interest in pursuing exaggerated and fraudulent claims but is it likely that by removing the incentive, this will result in yet further process-driven claims, with the consequence that fraud may increase?
If there is less profit margin, there may be less time to triage cases at the outset to remove fraud and then even less time spent on the claim once it enters the OIC.
There will have to be increased reliance on and the information provided by referral sources, such as a claims management company (CMC). If the information provided by a referral source is false and it is not fact-checked by those enabling the claim, then it follows that the detail put into the OIC will be false.
We have previously blogged here about the Financial Conduct Authority’s reminder to CMCs about not misleading consumers, completing sufficient checks and collecting relevant information before presenting claims to a third party to avoid submission of spurious claims. The question remains as to whether that warning is going to resonate with CMCs perhaps themselves operating on reduced profit margins.
Linked closely to the removal of financial incentive is that some anticipated the rise of the Litigant in Person (LIP) - a person pursuing a claim without legal representation. So much so the MoJ produced a 64-page guide to making a claim.
However, the data gathered by Kennedys shows that only 5% of claims are from Litigants in Person. The MoJ’s published data for the first quarter ending on 31 August 2021 shows 9.5% of 45,718 claims presented were from Litigants in Person.
Those percentages may well change as the new claims process matures and we will be tracking this.
The first influx of data suggests that there are plenty of legal representatives still motivated to pursue low value whiplash injury claims. There is less of a cash incentive but there is still some incentive and routes to maximising those incentives, as we will discuss in subsequent blogs.
In our next post we shall take a look at the emphasis placed on telling the truth when presenting and responding to a claim in the OIC.