UK Personal Injury Litigation 2005 is Datamonitor's flagship report on the UK's personal injury sector. It is a unique source of information which includes a plethora of injury statistics, quantitative and qualitative information on the ATE and BTE sectors, analysis and review of all regulatory issues and trends and detailed forecasts of claims numbers and claims costs.

• Comprehensive injury data covering motor, employers liability and public liability insurance
• Profiles of the leading accident intermediaries in the ATE sector including claims numbers and advertising data
• The latest insight into the plethora of legal and regulatory changes affecting the sector
• Latest forecasts of personal injury claims numbers and claims costs up until 2010

Datamonitor's personal injury survey shows that InjuryLawyers4U retained its top spot in 2005, generating the most claims per month. In second place was National Accident Helpline while other prominent players include Claims Direct and Accident Line.

If, as Lord Falconer has predicted, large well known retailers, supermarkets and banks enter into the provision of legal services, along with the AA and RAC, then they stand to significantly increase the current level of competition in the market place and reduce the market share held by accident intermediaries and solicitor firms

The introduction of the Compensation Bill in 2006 and the subsequent requirement for accident intermediaries to become authorized will lead to a strong contraction in the number of accident intermediaries in operation

• Understand the opportunities and threats in this market via Datamonitor's analysis of the legal and regulatory changes that are taking place
• Forecast of claims costs and claims numbers to inform your personal injury business strategy
• Gain insight into the business models and market shares of accident intermediaries and the future prospects for this type of company

CHAPTER 1 EXECUTIVE SUMMARY

The main insurance lines experienced a mixed personal injury environment in 2004-5

The number of personal injury claims declined in 2004-5 due to a drop in employers' liability cases

Motor personal injury costs are beginning to stabilize, while claims numbers are largely static

The number and overall cost of employers' liability claims dropped in 2004-5, partly due to the closure of the British Coal scheme

The number of public liability claims fell in 2004-5

The ATE market has stabilised over 2005 although some litigation continues

A small number of ATE underwriters and funding partners operate in the market

There is continuing litigation surrounding The Accident Group

Interviewees cited "ghost policies" as an issue affecting the ATE sector

Injury Lawyers4U took over National Accident Helpline as the leading advertiser of personal injury services in 2005

InjuryLawyers4U and National Accident Helpline are still generating the most claims

There have been few changes to the BTE market

DAS is the market leader in legal expenses insurance

Sales of BTE insurance remain flat due to a lack of incentives and low consumer awareness

There are concerns that the price of BTE insurance is too low

Bills currently passing through parliament will have a significant impact on the sector

The Compensation Bill has some flaws but will result in a better regulated sector

The Legal Services Bill will create competition for the provision of personal injury services

It looks increasingly likely that the small claims limit will rise, potentially leading to £380 million of cost reductions

Changes to the NHS compensation system will add to insurers' costs and could reduce the involvement of external solicitors

The ABI has suggested a new compensation model similar to that used in Ireland, however certain parties are challenging the proposals

The use of rehabilitation is on the increase

The Future Decoded

Datamonitor forecasts slow growth in the number of accident claims and steady growth in personal injury claims costs

CHAPTER 2 INTRODUCTION

What is this report about?

Who is the target reader?

How to use this report

CHAPTER 3 MARKET CONTEXT

Introduction

The number of personal injury claims declined in 2004-5 due to a drop in employers' liability cases

The number of accident claims increased in 2004/5 but has not returned to pre-2003 levels

The number of disease claims is decreasing now that the vast majority of British Coal miners have filed their claims

As employers' liability claims have fallen, motor personal injury claims numbers have risen and now account for the majority of personal injury claims

Motor personal injury costs are beginning to stabilize, while claims numbers are largely static

Motor personal injury claims increased by 7.5 per cent in 2004-5, but overall numbers have not changed significantly in the last five years

While motor personal injury claims costs are stabilizing, they still pose a significant challenge for motor insurers

Bodily injury is the most expensive type of motor claim

The average cost of motor personal injury claims settled in the same accident year fell in 2004

The growth in the cost of the average motor personal injury claim slowed in 2003 and 2004, and is likely to have fallen in 2005

Personal injury claims costs rose to account for approximately 34.6 per cent of total motor GWP in 2004

Personal injury claims slightly increased their share of motor claims costs in 2004

The total potential number of motor personal injury claims is limited by the falling number of injuries from RTAs

The number of road traffic accidents fell in 2004

The number of casualties has consistently dropped between 2000 and 2004

Injuries fell for all types of road user in 2004

Approximately 62 per cent of road users injured in accidents could be entitled to make a personal injury claim

Passengers account for the majority of potential motor personal injury claims

The total number of potential successful RTA injury claims was 476,000 in 2004

The number and overall cost of employers' liability claims dropped in 2004-5, partly due to the closure of the British Coal scheme

The number of employers' liability claims fell in 2004-5 as disease cases dropped following the closure of the British Coal scheme

The cost of employers' liability claims fell by nearly 10 per cent in 2004

The British Coal scheme has cost £2.8 billion so far, although the majority of payments are for £5,000 or below

The British Coal scheme is expected to cost £7.5 billion when all claims have been settled

The majority of compensation offers to claimants for respiratory disease fall within the £0k-£5k category

The most recent pleural plaque decision is good news for insurers

Workplace accidents and work-related ill-health dropped in 2004/5

The number of workplace injuries dropped in 2004/5

The number of workplace injuries, as reportable under RIDDOR, excluding acts of violence decreased by 7.1 per cent in 2004/5

The total number of workplace injuries is estimated to be 364,000 in 2004/5

Workplace fatalities dropped in 2004/5

Total work-related ill-health dropped in 2004 due to a decline in the number of non-lung cases

The number of sex, discrimination and race cases brought to employment tribunals fell, but average awards increased

The total number of sex, discrimination and race cases brought to employment tribunals dropped in 2004 due to a decline in the number of sex discrimination cases

Average awards for sex and disability cases increased in 2004/5 while awards for race discrimination fell

Employers' liability claims are both costly and lengthy to settle

Employers' liability claims have a long latency period

Claims costs can accumulate to become almost as large as the premium income received

The average cost of an employers' liability claim increases with time

The number of public liability claims fell in 2004-5, however fraud is still a major problem

Public liability claims fell by 4.6 per cent in 2004-5

Fraud is a significant problem in public liability claims

CHAPTER 4 ATE & BTE MARKETS

Introduction

ATE insurance covers the claimant against legal costs and is sold via a variety of parties

ATE insurance covers the claimant in the event that they lose their case and are required to pay the costs of the other side

Accident intermediaries and solicitors sell ATE policies to claimants

The role of consumer credit loans is diminishing

A small number of ATE underwriters and funding partners operate in the market

There are a small number of ATE underwriters

Litcomp entered the ATE market in December 2005

There are potential concerns over the availability of ATE insurance

The litigation funding market remains concentrated

There is continuing litigation surrounding The Accident Group and a new issue of ghost policies that needs to be addressed

There are several different court proceedings in progress against TAG and associated solicitors

Interviewees cited "ghost policies" as an issue affecting the ATE sector

Improvements in CFA regulations continue

Fixed success fees for CFAs have been extended to employers' liability cases

The regulatory regime for CFAs has been simplified

Much needed stability has returned to the ATE sector

Advertising plays a major role for accident intermediaries and personal injury lawyers

Advertising spending is concentrated in the legal services sector

Injury Lawyers4U took over National Accident Helpline as the leading advertiser of personal injury services in 2005

Accident intermediaries mainly advertise on television

Several personal injury lawyers were active advertisers in 2005

BGR Bloomer Solicitors

The Paul Rooney Partnership

Sherrington & Co

Browell Smith & Co

Fentons

Growth in new solicitor networks has slowed

InjuryLawyers4U and National Accident Helpline are generating the most claims

Profiles of accident intermediaries and personal injury law firms

Injury Lawyers4U

Injury Lawyers4U was formed in 2002 by Amelans solicitors

IL4U has rationalized its panel of solicitors

There is neither a designated insurer or funding partner

InjuryLawyers4U is a major television advertiser

The number of claims accepted increased in 2005

National Accident Helpline

National Accident Helpline was established in 1993

There are 110 member firms of solicitors on NAH's panel

NAH recommends Allianz Cornhill's Benchmark 3 ATE policy

The company generates its caseload largely via television advertising

NAH is currently accepting over 2,400 claims per month

Shoosmiths

RAC

AA

The AA dissolved its solicitor panel in 2005

The AA will form a separate legal services business under new government regulations

Accident Line

The Accident Line brand was formed in the early 1990s by the Law Society

There are 250 member firms on AL's panel

AL generates business via directory advertising and relationships with advice agencies

AL moves to staged premiums

Claims Direct

Claims Direct operates a small panel of solicitors

Its caseload is generated via a mix of advertising media

400 cases are accepted per month

The company is heavily involved in the regulation of the sector

Personal Injury Helpline

Accident Advice Helpline

Accident Advice Helpline was set up in 2000

Its funding partner pulled out of the market in 2004 and the company went into administration as a result

Its advertising budget was cut significantly in 2005

DAS is the market leader in legal expenses insurance

DAS held 19.6 per cent of the legal expenses insurance market in 2004

Sales of BTE insurance remain flat due to a lack of incentives and low consumer awareness

Sales of BTE insurance on products other than motor insurance remain low due to broker and insurer apathy

Growth of legal expenses cover is further limited by a belief that "it'll never happen to me"

There are concerns that the price of BTE insurance is too low

Solicitors are still underutilizing BTE policies

Specialist intermediaries are playing a greater role in BTE insurance

Arc Legal Assistance has expanded its range of products

Temple Legal Protection is established as a leading player

CHAPTER 5 REGULATION AND ISSUES

Introduction

The Compensation Bill has some flaws but will result in a better regulated sector

There is concern over the provision for negligence

There are various loopholes in the Compensation Bill

A new regulator has yet to be decided

The number of claims farmers will diminish post regulation

The Legal Services Bill will create competition for the provision of personal injury services

The government has released further proposals for the regulation of legal services

There are 6 main proposals in the White Paper which outline the reform of the legal system

The Legal Services Bill aims to open up the profession to competition

Competition for the provision of personal injury legal services will increase, resulting in reduced market share for existing players

The AA will launch AA Legal Services in 2007

Claims intermediaries and solicitors will face competition for business

It looks increasingly likely that the small claims limit will rise, potentially leading to £380 million of cost reductions

The insurance industry continues to lobby for an increase in the small claims court limit

Legal fees will be cut significantly if the small claims court limit is increased

The ABI has suggested a new compensation model similar to that used in Ireland, however certain parties are challenging the proposals

The ABI has proposed a radical new compensation system

The ABI's proposals for a new compensation system have come under criticism

Changes to the NHS compensation system will add to insurers' costs and could reduce the involvement of external solicitors

The extension to the NHS clawback scheme will add to insurers' costs

The proposed NHS Redress Bill will reduce the involvement of solicitors in clinical negligence cases

The use of rehabilitation is on the increase

A recent pilot by Norwich Union found that the use of rehabilitation in whiplash claims is beneficial

There are calls for better regulation of the rehabilitation sector

The revised Rehabilitation Code was added to the Pre-Action Protocol for Personal Injury Claims in April 2005

CHAPTER 6 THE FUTURE DECODED

Introduction

The number of personal injury accident claims is forecast to grow slowly between 2005/6 and 2009/10

The number of accident claims is forecast to increase by an annual average of 2.5 per cent under the Personal Injury Industry scenario

The number of accident claims is forecast to grow incrementally under the Datamonitor scenario

Datamonitor estimates that personal injury claims costs will reach £6.4 billion in 2005/6, a slight decrease on the previous year

Datamonitor estimates that claims costs declined slightly due to the fixed fee system and falling public liability claims numbers

Datamonitor forecasts that total personal injury claims costs will surpass £7 billion by 2009/10

The average personal injury claims cost continues to rise, however a change in the small claims court limit would serve to reduce legal costs

Legal costs on RTA claims over £10,000 and the base fee on employers' liability claims continue to rise

An increase in the small claims court limit would reduce the legal costs paid out by insurers

CHAPTER 7 APPENDIX

Supplementary data

Funding options for personal injury claims

The impact of the reforms to the Access to Justice Act 1999

The withdrawal of Legal Aid

Private funding

CFAs: the key to the courtroom door?

Legal expenses insurance

Definitions

Research methodology

BTE and Personal Injury surveys

Interviews

Current publications

Future publications

Datamonitor's custom research capabilities

SPP writing team

List of Tables

Table 1: Number of personal injury claims made to general insurers, split by accident and disease, 2001-5

Table 2: Personal injury claims split by insurance category, 2003-5

Table 3: Number of motor personal injury claims, 2001-2 to 2004-5

Table 4: Average motor claims payout and percentage of claims with a payment by type, 2004

Table 5: Average cost of a motor personal injury claim, 2000-4

Table 6: Motor bodily injury claims volume and average amount, 2000-4

Table 7: Personal injury claims costs as a percentage of motor GWP, 2000-4

Table 8: Personal injury claims costs as a percentage of total motor claims costs, 2000-4

Table 9: Number of road accidents in the UK compared to licensed vehicles, 1994-2004

Table 10: Number of road accident casualties split by severity of injury, 2000-4

Table 11: Road traffic injuries split by type of injured party, 2000-4

Table 12: Comparison of share of injuries and share of potential claims split by road user type, 2004

Table 13: Potential number of successful RTA injury claims per year, 2004

Table 14: Number of employers' liability personal injury claims split by accident and disease, 2001-5

Table 15: Employers' liability gross incurred claims, 2000-4

Table 16: Number of claims made to the DTI and total compensation paid for respiratory disease and vibration white finger under the British Coal scheme as of 4th December 2005

Table 17: Profile of offers made by the DTI to claimants for respiratory disease under the British Coal Scheme

Table 18: Workplace injuries reportable under RIDDOR, 2000/1-2004/5p

Table 19: Workplace injuries, reportable under RIDDOR, excluding acts of violence, 2000-5p

Table 20: Total estimated workplace injuries reportable to the HSE, 2000-5p

Table 21: Workplace fatalities reported under RIDDOR, 2000-5

Table 22: Number of cases of occupational disease and work related mental ill-health, 2000-4p

Table 23: Number of applications registered by employment tribunals including sex, race and disability discrimination cases, 2000-5

Table 24: Median and average compensation awarded by tribunals for sex, race and disability discrimination cases, 2003-5

Table 25: Number of employers' liability claims paid by year of origin, 1995-2004

Table 26: Employers' liability claims costs as a percentage of GEP in year of origin, 1995-2004

Table 27: Average cost of paid employers' liability claims by year of origin, 1995-2004

Table 28: Number of public liability claims, 2001-5

Table 29: Top 20 advertisers of legal services, 2003-5

Table 30: Top 20 advertisers of legal services, by medium, 2005

Table 31: Monthly accepted caseload by competitor, 2005

Table 32: Market share of legal expenses insurance, 2001-4

Table 33: Scenario forecasts for personal injury accident claims numbers

Table 34: Personal injury claims costs by line of business, 2003/4-2005/6

Table 35: Scenario forecasts for personal injury claims costs, 2003-10f

Table 36: Number of personal injury claims made to general insurers, split by accident and disease, Q2 & Q3 2005

Table 37: Number of personal injury claims made to general insurers split by insurance category, Q2 & Q3 2005

Table 38: Potential personal injury claims arising from RTAs

Table 39: Legal expenses GEP by competitor, 2000-4

Table 40: Legal expenses premium income by line of business, 1992-2002

Table 41: Ratio of legal expenses claims incurred to GEP by sector, 1992-2002

Table 42: Legal expenses claims incurred and number of claims notified by sector, 1992-2002

List of Figures

Figure 1: The number of accident claims increased while the number of disease claims decreased in 2004-5

Figure 2: Motor and employers' liability claims account for the majority of personal injury cases

Figure 3: The number of motor personal injury claims increased in 2004-5, however there has been little change overall between 2001-2 and 2004-5

Figure 4: Personal injury claims are the most expensive form of motor claim but the least frequently paid

Figure 5: Growth in the average cost of a motor bodily injury claim settled over two years is flattening off

Figure 6: Personal injury claims increased as a proportion of total motor GWP in 2004 as the market softened

Figure 7: Personal injury claims costs made up a larger proportion of total motor claims costs as rampant personal injury claims inflation continued

Figure 8: The number of RTAs have fallen every year since 1997

Figure 9: The proportion of vehicles involved in RTAs has dropped successively since 1994

Figure 10: The number of people slightly injured in road traffic accidents has fallen over the medium term

Figure 11: 2004 saw a drop in the number of motorcyclists injured in traffic accidents

Figure 12: Passengers account for the majority of potential motor personal injury claims

Figure 13: The number of employers' liability claims declined in 2004/5

Figure 14: The total cost of employers' liability claims fell in 2004

Figure 15: The majority of offers made to claimants under the British Coal Respiratory Scheme are for £5k or below

Figure 16: Most fatalities in places of work occur to members of the public

Figure 17: Non-lung related ill-health dropped sharply in 2004

Figure 18: Total applications for employment tribunals fell in 2004/5

Figure 19: The number of sex discrimination cases has been erratic between 2000/1 and 2004/5

Figure 20: Employers' liability claims have a long latency period

Figure 21: Employers' liability claims costs accumulate over time

Figure 22: The average cost of settling an employers' liability claim increases with time

Figure 23: The number of public liability claims has fallen since 2002

Figure 24: Timeline of corporate failures in the ATE sector

Figure 25: Injury Lawyers4U spent the most on advertising personal injury services in 2005

Figure 26: National Accident Helpline and Injury Lawyers4U generate the highest number of cases per month

Figure 27: Profile of Injurylawyers4U

Figure 28: Profile of National Accident Helpline

Figure 29: Profile of Accident Line

Figure 30: Profile of Claims Direct

Figure 31: DAS is the market leader in BTE insurance, 2004

Figure 32: Part 1 of the Compensation Bill

Figure 33: Timeline of the Legal Services Bill

Figure 34: The main proposals in Falconer's White Paper for reform of the legal system

Figure 35: Alternative Business Structures will be regulated directly by a Front Line Regulator

Figure 36: Datamonitor forecasts that the number of personal injury accident claims will increase marginally between 2005/6 and 2009/10

Figure 37: Personal injury claims costs are forecast to fall in 2005/6 and begin to increase in 2006

Figure 38: Datamonitor's core consulting capabilities