It’s all about the money II:

“Compensation Culture”

LAWS6510 Law of Tort

Week 33 Lecture 2
What ideas do you associate with ”Compensation Culture”?
 What does ChatGPT think?
• The idea of a "compensation culture" in the UK refers to the perceived trend of individuals making claims for
compensation for personal injuries or accidents, often with the help of claims management companies or personal
injury lawyers. While there is debate about the extent and causes of this phenomenon, there is some evidence that
supports the claim that there is a compensation culture in the UK:
• Increase in personal injury claims: The number of personal injury claims in the UK has increased significantly
over the past few decades. According to the Association of British Insurers, the number of motor insurance claims
has increased by 40% since 2006, while the number of employer liability claims has increased by 50%.
• Increase in claims management companies: Claims management companies (CMCs) are businesses that help
individuals make personal injury claims, often taking a commission from any compensation awarded. The number
of CMCs in the UK has increased from around 1,000 in 2007 to over 4,000 in 2019, according to the Financial
Conduct Authority.
• Media coverage: The media often report on high-profile personal injury cases, which can create the impression
that compensation claims are becoming more common and that people are increasingly willing to sue for even
minor injuries.
• International comparisons: The UK has a higher rate of personal injury claims than many other countries. For
example, the UK has around 10 times more whiplash claims per year than France, despite having a similar number
of road accidents.
• However, it is important to note that there is also evidence to suggest that the compensation culture in the UK
may be overstated or misunderstood. For example, research by the Centre for Policy Studies found that the
number of personal injury claims in the UK has actually fallen in recent years, and that the UK has a lower rate of
personal injury claims per capita than many other countries. Additionally, the rise in CMCs may be due to changes
in regulation and the entry of new players into the market, rather than an increase in the number of claims being
made.
 What about Claude+?
There is mixed evidence regarding the existence of a compensation culture in the UK. Some of the evidence cited in support of the
claim includes:
• Rising costs of public liability insurance premiums, especially for local authorities and small businesses. This is seen as a sign
of increasing litigation and compensation claims.
• Rising numbers of personal injury claims, especially for whiplash injuries from car accidents. Critics argue this shows a
litigious mentality and a tendency to claim for minor injuries.
• Perceptions of a compensation culture in public opinion surveys. Many people believe there is a compensation culture, though
it is not clear this matches reality.
• Anecdotal examples of frivolous lawsuits, though it is unclear how representative these are.

However, skeptics argue that there is little hard evidence to support the existence of a widespread  compensation culture:
• Official statistics show only small increases in the number of claims over time, and most claims are for serious injuries.
Whiplash claims have declined recently.
• International comparisons show the UK does not have an unusually high level of claims. In fact, claim rates are lower than in
most other European countries.
• Many scholars argue fears of a compensation culture are exaggerated and fuelled by media hype and lobbying by insurance
companies and corporations.
• Surveys show the public greatly overestimates the likelihood of successful claims and average payouts. Perceptions do not
match reality.
• There is little evidence that a litigation culture deters economic activity overall. Businesses cite other factors such as the overall
economic climate as much more significant risks.

So in summary, while there are some indicators that could be interpreted as signs of a  compensation culture, the evidence is mixed
and there are good reasons to be skeptical of the existence of a widespread compensation or litigation culture. The reality appears to
be more complex than the media stereotype.
  Too many claims
What do we  Too many unjustified claims
 because fraudulent,
mean by exaggerated, trivial or
Claimant’s own fault
Compensation  For too much money

Culture?  Fueled by greedy Claimants,

lawyers and/or claims management
companies
Generally, a  “Have you been in an accident
in the last 3 years?”
pejorative term  UK is becoming like the US
  How many claims are there?

Too many  Are legal claims on increase whilst

number of accidents on the decline?
claims?  (See seminar)

 How many is “too many”?

How many claims are there?

https://www.gov.uk/government/publications/compensation-recovery-unit-performance-data

NB: Covid & Civil Liability Act 2018

 Too many claims?

Ipsos MORI online survey of individuals’ handling of legal issues in England & Wales 2015
n = 8192
Too many unjustified claims?

 Fraudulent claims
 Fabricated claims
 Exaggerated claims

 “Trivial” claims
 Low value but high nuisance
 Minor accident but high value
 Fraudulent claims
How do courts deal with
fraudulent claims?

• Forensic process
• s.57 Criminal Justice and
Courts Act 2015
• “fundamental
dishonesty”
• But settlements by
insurers (‘nuisance’ value)
• Litigation syndrome…

This is “just” cash for crash

 Trivial claims I:
Low value, high
nuisance eg whiplash

‘possibly as many as 1/2 of all claims

are worth less than £5,000*
4/5 may be associated with whiplash
90% of RTA claims include whiplash’
- Richard Lewis

“reforms to whiplash claims cannot

come soon enough”
Association of British Insurers
(23/02/17)

*cf. AI-generated response by

Claude+
The Express
 Civil Liability Act 2018

1“Whiplash injury” etc

(1) In this Part “whiplash injury” means an injury of soft tissue in the neck, back or shoulder that is of a description
falling within subsection (2), but not including an injury excepted by subsection (3).

(2) An injury falls within this subsection if it is—

(a) a sprain, strain, tear, rupture or lesser damage of a muscle, tendon or ligament in the neck, back or shoulder, or

(b) an injury of soft tissue associated with a muscle, tendon or ligament in the neck, back or shoulder.

(3) An injury is excepted by this subsection if—

(a) it is an injury of soft tissue which is a part of or connected to another injury, and

(b) the other injury is not an injury of soft tissue in the neck, back or shoulder of a description falling within
subsection (2).
 New
whiplash
tariffs
 Trivial
claims II: “He slipped on a
grape!!!”
Minor
accident,
high value Conflation of nature
of “trivial”/minor
claim accident with level
of damages
 The long • A grocer from Lancashire slipped while playing Blind Man's

life of •
Buff – £15 paid in 1878 (modern equivalent: £724).
A travelling salesman from Belfast hit his head on a pole while
watching an accident from the top of a tram – £7 paid in 1904

trivial •
(modern equivalent: £401).
A merchant from Essex injured his eye while throwing rice at
a wedding – £50 paid in 1892 (modern equivalent: £2,994).

claims and •

•
A shipbuilder from Great Yarmouth swallowed a fish bone –
£1,000 paid in 1900 (modern equivalent: £57,000).
An artist from Swansea blown down by gale of wind – £30

media •
paid in 1886 (modern equivalent: £1,796).
A pharmacist from Dublin slipped on marble steps in a Turkish

hype!
bath – £33 paid in 1885 (modern equivalent: £1,594).
• An innkeeper from Handsworth, Birmingham, took poisonous
potion after mistaking it for a sleeping medicine – £1,000 paid
in 1878 (modern equivalent: £48,310).
• A merchant from Glasgow injured while jumping out of bed to
catch his wife who had fainted – £42 paid in 1895 (modern
(from the AVIVA •
equivalent: £2,575).
In 1900 a bank clerk slipped on orange peel and was paid
archives) £156 in compensation – equivalent to £8,901 today. 

Guardian 14 July 2011

 How much is too much?

• UK spends £10.1bn (2001/2004 (David Davis) figures)

or 0.6-1.0% of GDP according to Institute of Actuaries.
US spends > 2%.

For too Judges not jurors award damages in UK

• Periodic Payment Orders (v. lump sum); we live longer

much
• Recoupment of State benefits & NHS costs from D’s
insurer
• Rising cost of pain
• Wells v Wells (1998) HL

money? • Heil v Rankin (2000) HL

• Simmons v Castle (2012) CA post-Jackson reforms
• “Discount rate” in lump sum cases set by Lord
Chancellor under Damages Act 1996
• -0.5% rate added £4.5 bn to insurance provisions
(apparently)
• but cf. Civil Liability Act 2018: Current rate is -0.25%
Which is why:
  Are we “litigation crazy” where accidents are always someone else’s
UK becoming fault or responsibility (“where there’s blame there is a claim”)?
 Fear of being sued therefore we don’t do “risky” things?

like US?  Over-deterrence?

 What do the statistics say? Back to “too many claims”
 Or are the stories media generated “tort tales”? FAKE NEWS? See
Fake Law by Secret Barrister
 NB we don’t have juries and limited class actions
The social cost of the
compensation culture:
schools & conkers… BBC News 4th October 2004
Fake news?
Compensation culture is
fueled by greedy Claimant
lawyers & claims
management companies
therefore they need to be
controlled?
 Targeting • (inter alia) Part II Compensation Act
2006: Claims Management Regulator
claims • Raising of small claims limit to 5000
management GBP (for RTA PI) under Civil Liability Act
2018
companies & • But is it greedy to assert your rights in a
greedy genuine claim?
lawyers • And don’t we need access to justice via
lawyers?
– Do you understand PI law?
 • Compensation Act 2006

• Jackson Report ‘Review of Civil

Litigation Costs’ 2009
– Lord Young’s report ‘Common
Recent Sense, Common safety” 2010
governmental – Fed into LASPO 2012 and SARAH
responses to the 2015
alleged
• Governmental response to Lofstedt
compensation Report ‘Reclaiming Health and Safety
culture for all’ (2011)
– led to Enterprise and Regulatory
Reform Act 2013

• Civil Liability Act 2018

 PI claims issued in the County Courts 2009-
2022
160,000

“Claims 140,000

numbers in 120,000

100,000

freefall” 80,000

60,000

40,000

20,000

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

civil-Justice-stats-main-tables-Oct-Dec.ods (live.com)
 UK population 66.85 m (2019)

Incidence of disability:
up to 14m (23% of population);
Scope says 12.9 m;
Office for Disability Issues suggests 11.2% of working age
Contextualising the
claims statistics Annual incidence of accidents sufficiently serious for
hospitalization (home & leisure only): 5.5 m (2002 –
Census); see further seminar eg on accidents at work
650,000+ pa & see RTAs (a few hundred thousand) &
incidents @ hospital.

Total number of claims notified to CRU: less than

550,000; total claims issued less than 85,000
A better question: Why so few claims?
 • The law you study is a tiny proportion and
arguably poor reflection of what happens “out
there”
• If there are millions of accidents per annum, why
are less than 550,000 reported to CRU?
– Is there enough claiming going on?
Questions to • Who benefits from attacks on the tort system?
See Fake Law
consider when • Who (if anyone) needs the tort system?
– Apart from lawyers…
thinking about • What sort of justice is at stake?
compensation – Should we hold others responsible or take
responsibility ourselves (what if we can’t
culture afford to?)
• What shape access to justice (very acute (!)
triangles v squares)
• What’s the point in having rights if you can’t
enforce them?
– Do we need lawyers? If so, who should pay
for them?
 • Has led to a significant increase in litigants
in person, especially in family courts;
•
Bar increased delays in court and additional
burdens on court resources

Council’s • increased and likely unsustainable

pressure on frontline providers offering
free legal support, advice or
Final Report representation (Think KLC)

on LASPO • A growing reluctance of solicitors and

barristers to take on complex, low value
litigation, denying many access to legal
(September advice and representation; and
• A growing number of barristers actively
2014) considering the viability of a long-term
career at the Bar.
Reduced
claims
reduced ….
payouts;
reduced
legal costs
(for lawyers);
increased
court fees
Got to be good, right?
 ABI key facts:
The £31m underwriting profit in 2019 [for motor insurance] was a significant decrease from
the £515m underwriting profit in 2018.

The liability market made an underwriting profit of £297m in 2019,

a decline from £415m in 2018.

https://www.abi.org.uk/data-and-resources/industry-data/uk-insurance-and-long-term-savings-key-facts/
 Where next for civil justice?
• 12 January 2016 Briggs LJ Civil Courts Structure Review (CCSR) (see Chapter
6) Provisional View:
• “There is a clear and pressing need to create an Online Court for claims up
to £25,000 … to give litigants effective access to justice without having to
incur the disproportionate cost of using lawyers…
• Stage 1- a largely automated, inter-active online process for the
identification of the issues and the provision of documentary evidence;  
• Stage 2 – conciliation and case management, by case officers [not judges,
but low-level civil servants] (or ChatGPT??)
• Stage 3 resolution by judges. The court will use documents on screen,
telephone, video or face to face meetings to meet the needs of each case.”
 To run
alongside • About cutting costs (including
getting rid of court buildings)
HMCTS – 90 of 240 county courts closed
Reform by 2018
Programme • Litigation = last resort
– The SRA and the QLD…?

• 2.24 Briggs report: “Leaving aside

the clarification of the law, the
ultimate success of the civil courts
would be fully achieved if, like the
nuclear deterrent, they never had
to be used at all.”