The new crackdown on whiplash compensation could put thousands of jobs at risk, according to research commissioned by lawyers who argue the reforms will harm injured motorists as well as their industry.
Researchers at Capital Economics found that 44,200 people work on personal injury cases in legal, medical and claims management jobs, while a further 40,000 depend more loosely on the industry through the supply chain and other spending.
In the study commissioned by the Access to Justice lobby group, Capital Economics found that 35,000 of these jobs would be at risk if small claims are kept out of the courts, with Manchester and surrounding counties likely to be the hardest-hit.
“The government quite properly flew ministers to India to try and rescue 10,000 steel jobs, yet our own Justice Secretary, whose job it is to nurture the law, is hell-bent on shutting down an entire industry and riding roughshod over important rights that have been part of British law for centuries,” said Martin Coyne, managing director of Ralli Solicitors and head of the industry’s campaign to water down the new rules.
Under reforms that were announced in 2015, the government plans to raise the limit on small personal injury compensation from £1,000 to £5,000, enabling more people to take their case to small claims court – without the need for a lawyer.
The rules would also ban settlements without medical checks and outlaw cash payments for minor injuries, replacing these payments with help towards rehabilitation for proven injuries. More than half a million people received compensation after a car accident last year.
The proposed changes would cut a total of £1.2bn a year from insurance costs, while claimant lawyers would lose £20m in revenues and medical reporters £23m, according to estimates by the Ministry of Justice.
Capital Economics found that more than one in four law firms in the industry will lose virtually all their revenues if the reforms go ahead.
Several large insurers have promised to pass on the savings to customers, and the Government claims the changes will cut £40 a year from each motor policy.
Insurance prices plunged after an earlier crackdown on injury claims in 2012, which required more stringent medical checks for whiplash and other tissue damage in an attempt to stamp out fraudulent or exaggerated claims.
However, premiums have jumped 14pc in the past year – a rise that the insurers have blamed on the upward march of bogus ailments, as well as repeated tax hikes on premiums.
The Capital Economics report has been sent to ministers involved in the reforms. A consultation on the new rules closed earlier this month.
“We all agree it’s necessary to reduce fraudulent and frivolous claims, and get rid of cold calling, but not at the expense of tens of thousands of jobs and for the sole benefit of insurance companies,” said Mr Coyne.
“There are better ways to maintain the historic and important rights of injured people to receive redress yet also tackle fraudsters who try and game the system.”