The Gazette recently ran a story headlined ‘Insurers to blame for motor premium hike’. This claim is demonstrable nonsense. A standard whiplash claim costs an insurer anything between £1,000 and £5,000, as per the JSB guidelines. The standard fees under the Ministry of Justice, or Part 45 fixed costs could cost anything between £1,200 (MoJ) and £2,430 (fixed costs based on a settlement of £5,000). This means that a typical case could cost an insurer anything between £2,200 and £7,430.

The assertion that insurers do not challenge whiplash claims is simply incorrect. If an insurer wishes to do so they must content themselves with arguing the matter in terms of causation only, also known as Delta V. This can be seen in the cases of Barker v Watkins (2006) and Armstrong v First York (2006). In the case of Barker, the judge stated: ‘The court is not required to decide how likely it is that the forces involved could have caused injury, but rather whether, more probably than not, they actually did cause injuries in the particular circumstances of a particular case and (if so) what injuries they did cause.’ Therefore, the case of Barker effectively states that Delta V arguments are arguments for medical experts to decide on.

However, the case of Armstrong effectively states that even where the medical evidence establishing the injury is inconclusive (that is, two experts disagree), the general presumption is that an injury has been caused and that the disputing party is likely to have missed something. A similar position was recently affirmed in the case of Charnock and others v Rowan and others (2012).

One must therefore question how insurers can be accused of simply not wanting to challenge such points. The judiciary is simply unprepared to aid insurers in challenging these matters. Instead, they have imposed a general line of thought that tends to say: the defendants have been negligent in their actions and therefore, on the balance of probabilities, it is likely that an injury has been caused.

Of course the above it not absolute, but in order to rebut this general presumption an insurer needs to jump through all sorts of hoops. Casey v Cartwright (2006) gives guidance on this point. First, the insurer needs to inform the other side of their intention to raise these arguments within three months of their letter of claim. This means that if the matter is a potential MoJ case, then the case will exit the MoJ process, which in turn incurs the insurer a greater cost in terms of third-party costs.

Forensic evidence

Next, the insurer has to obtain specialist forensic evidence, which can cost around £1,000. Then there is the dispute between medical experts, which it must be remembered insurers have no automatic right to challenge under the fast-track rules. Even if the insurer jumps through all these hoops successfully, the current case law illustrates that there is still a high probability that the insurer will lose their arguments and thereby incur greater third-party costs due to the third party’s 100% success fee.

This means that the cost of running such cases to trial for an insurer will likely be in excess of £10,000 just in terms of the third party's costs. As shown above, this is more than we would expect to pay for a claim settled on a full basis in accordance with the fixed-costs regime. If the insurer then includes their own solicitor’s fees, which can be between £5,000 and £10,000, then it quickly becomes apparent that, economically, it is unfeasible for an insurer to raise these arguments as if they were the norm.

Finally, the suggestion that ‘the motor insurance industry is profiting’ shows a complete lack of understanding of how insurers operate. Most make losses on their motor (personal insurance) underwriting books. Insurers make their money off their investments, not their premiums.

The fault does not lie with insurers, but rather rests with a legal system which exercises laziness against these claims and supports claimants over defendants. At the end of the day, it is simply cheaper for an insurer to pay out these claims instead of challenging them, especially given the pressures exerted upon insurers to keep premiums low.

Byron Shepherd is a casualty claims-handler at a major insurance company and a graduate member of the Institute of Legal Executives. The views expressed are personal