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One year on: The impact of the whiplash reforms on fraudulent credit hire claims and what does the future hold?

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By Helen Mason


Published 06 June 2022


The whiplash reforms and the launch of the Official Injury Claim Service (OIC) came into effect on 31 May 2021, applying to road traffic accidents occurring on or after that date where there is a claim for injury valued at no more than £5,000 and the total claim is valued at no more than £10,000 (excluding Non-Protocol Vehicle costs). 

One year on, what has been the impact of the reforms in the credit hire fraud arena?

Given the aim of the whiplash reforms was to tackle the problem of false or exaggerated personal injury claims as opposed to addressing exaggerated or fraudulent credit hire claims, it should not be too much of a surprise to discover that one year on, the OIC has had no positive impact on the credit hire fraud arena. 

The frequency of suspected credit hire fraud has actually increased over the last twelve months as has the average value of the credit hire claim presented. The average overall credit hire value has increased by £5,000 per claim, with the average period increasing by 10 days and the daily rate increasing by £40. Notwithstanding this increase in value, the amount actually paid has remained static (where a full or partial repudiation was not secured). 

Why is this the case?

As the whiplash reforms don’t apply to motor cyclists, non-injury claims or claims involving a foreign motor vehicle, a significant proportion of suspected credit hire fraud claims continue to be identified and challenged as they did pre the implementation of the OIC. In the event that these claims litigate, they proceed either via the MOJ portal or under Part 7 of the Civil Procedure Rules. In practice, claims handlers are generally now sufficiently experienced, supported by ‘know your opponent’ intelligence in addition to bespoke fraud strategies to appropriately handle claims presented and ensure claims proceed via the most appropriate channel.

Even where the OIC applies, Non Vehicle Protocol losses (NVCs) are not included in the initial stages, which again, means that on receipt of payment packs, claims teams are able to continue with their pre OIC approach of screening and contesting credit hire claims presented where there are either technical credit hire arguments or fraud concerns. Investigations can be undertaken pre litigation and evidence collated to be used to secure the right outcome, whether that be paying the right amount at the right time or securing a full or partial discontinuance. 

This is a stark contrast to those defending suspected injury driven fraud types including no impact, phantom passenger, induced, causation, low speed impact, exaggeration or staged where claims handlers have 30 days from the submission of the Small Claim Notification Form (SCNF) to investigate the claim, make a decision on liability, in addition to making a strategic assessment on whether to proceed via the OIC or to leave the portal on the grounds of complexity, fraud or causation.

Whilst this goes some way to explaining why the average amount paid on claims hasn’t increased, why has the value of claims risen since the commencement of the OIC? There are two main reasons for this, the first is due to enabler behaviour, as many of the more unscrupulous credit hire organisations, accident management companies and their associated companies look to recover lost revenue experienced as a direct result of the impact of the whiplash reforms.

The second reason requires us to look at the wider context and the current economic climate. Inflation currently stands at 9% and prices are rising at their fastest rate for 40 years. Genuine credit hire claims are increasing in value (due to an increase in period as well as daily rate) as the market struggles to grapple with labour shortages, supply chain problems, the impact of war in Ukraine and the resurgence of Covid in China. However, there are those trying to artificially inflate and exaggerate costs even higher, seemingly hoping insurers will just put it down to the general costs of inflation.

What’s happening to credit hire (NVCs) in the OIC portal?

As it stands it’s too early to provide any meaningful commentary about credit hire claims being dealt with in the portal. One year on, we have only seen one NVC and so what follows is focussed on the approach that should be taken when handling suspected fraudulent credit hire claims. 

As previously mentioned, credit hire claims are not included in the initial stages, only coming into play when the injury cannot be agreed. At this point, the Claimant will be asked questions in relation to any outstanding credit hire, damage and storage. Where the inclusion of these claims increases the total value to above £10,000 the claim can leave the OIC portal and will proceed as a fast track or multi track claim under Part 7. Given the average total value of fraudulent credit hire claims is above £25,000 many of these claims will exit the portal and will be subject to rigorous fast track or multi track directions.

Where the claim doesn’t exceed £10,000 the compensator will need to complete the NVC response document and whilst credit hire specific directions will follow, the claim will be allocated to the small claims track which is not appropriate to address cases in which there are serious concerns about the credit hire. In these cases, you and your panel will need to consider requesting allocation to the fast or multi track so that fraud can be pleaded and the relevant evidence obtained.

The future?

As to credit hire claims which remain in the OIC, future outcomes is presently unclear, but over the next year, we should start to see an increasing number of NVCs go through the process and this will enable us to take a view on how best to direct such cases to secure the most favourable outcome.

Over and above the impact of the OIC, wholescale credit hire reform is highly unlikely as the MOJ have confirmed there is no appetite for reform outside of injury, and so, the market will need to continue with its previous and current efforts to identify, investigate and successfully defend suspected fraudulent credit hire claims.

In respect of credit hire fraud, it’s safe to say, expect more of the same behaviours, claims and values over the forthcoming months and years especially as inflation is predicted to continue rising.

It is however appropriate to make one final observation in respect of the future, which whilst it isn’t OIC centric, the impact on the credit hire and credit hire fraud arena is likely to be profound and that’s the extension of the fixed costs regime to the fast track and monetary claims with a value of up to £100,000. This will capture the majority of suspected credit hire fraud claims. It is highly likely that the extension of fixed costs will again change enabler behaviour as those losing out on revenue through lost costs, will look to recover deficits by exploiting other opportunities in the system. Only time will tell.