The Impact of Speed and Accuracy in Personal Injury Cases: A Law and Economics Analysis

In various countries, initiatives have been taken to speed up the process to provide compensation to victims of personal injury. There are some concerns that speeding up the process (inter alia via alternative dispute resolution mechanisms) may go at the expense of accuracy. Within this paper, we use a law and economics framework to show that generally accuracy in individual cases comes at high costs but is less important than often thought. Neither from a deterrence, nor from a compensation perspective is perfect accuracy in each individual case the necessary aim to strive for. As long as the injurer is held to pay compensation that is on average correct, the right behavioral incentives are provided for both tortfeasors ex ante. Also victims are generally appreciative of averaging compensation payments. We discuss recent developments in claims handling in Belgium, Ireland and Sweden, showing how these countries have attempted to speed up victim compensation (and therewith increased victim satisfaction) and how these processes have been facilitated by a standardization of the compensation payments. We argue that the experiences in these countries show that speeding up compensation to victims is indeed possible and that the reduction of accuracy in specific cases (resulting from a standardization of the compensation) is not problematic, neither from the deterrence, nor from the compensation perspective. Cautious policy conclusions in awareness of the lack of a one-size-fits-all-approach are formulated.