Asked by Lord Hayward To ask Her Majesty’s
Government what progress has been made in tackling the abuse of
personal injury claims relating to incidents involving motor
vehicles. The Advocate-General for Scotland (Lord Keen of Elie)
(Con) My Lords, reforms to address road traffic
accident-related...Request free trial
Asked by
-
To ask Her Majesty’s Government what progress has been made
in tackling the abuse of personal injury claims relating to
incidents involving motor vehicles.
-
The Advocate-General for Scotland (Lord Keen of Elie)
(Con)
My Lords, reforms to address road traffic accident-related
soft tissue or whiplash personal injury claims have been
taken forward through the Prisons and Courts Bill,
introduced on 23 February. These include a fixed tariff of
compensation for whiplash claims and a prohibition on
offers to settle such claims without medical evidence. A
number of changes to the small claims limit for personal
injury will also be made.
-
(Con)
My noble friend will be aware that a year ago to the day I
asked a Question in relation to John Elvin, who reported to
his insurer, Sheilas’ Wheels, an accident that he was
convinced would be the subject of a false whiplash claim.
It was settled and we now have the figures. Sheilas’ Wheels
paid £1,500 for damage to a car that was not inspected and
the people concerned were given over £6,000 for personal
injury, despite the fact that they were able to leap out of
the car and protest about a non-existent injury. Is it not
the case that the industry has enough to do in putting its
position right, as well as dealing with other issues that
apply in these cases?
-
My Lords, I quite understand the point that has been made.
That is why we have included in the proposed legislation a
ban on insurers making offers to settle such claims without
medical evidence. We have of course addressed the issue of
medical reports through the MedCo scheme.
-
(Lab)
My Lords, I refer to my interest as an unpaid consultant in
the firm of solicitors in which I was senior partner. The
increase in the small claims limit for whiplash cases is
likely to lead to greater activity by claims management
companies, which will take a substantial cut from any
damages. Will the Government take steps to control this
parasitic industry? This week, the Lord Chancellor
announced changes to the way in which damages for personal
injuries are calculated. Such damages are estimated to cost
the National Health Service, which recovers the costs of
treatment for motor accident claims, an estimated £1
billion a year, and they increase insurance premiums. Is
this not a classic example of a ministerial car crash?
-
No, my Lords, this is not a ministerial car crash. I remind
the noble Lord that the increase to which he refers arises
as a result of the application of the discount rate
introduced by the Damages Act 1996, which was last reviewed
in 2001. The object of the change in the discount rate is
to ensure that those who suffer catastrophic and
life-changing injuries are fully and properly compensated
for those injuries by reference to the damages calculation
for their future care and support.
-
(LD)
I have a copy of the report. Will the Minister comment on
the following two simple statements? The report says that,
once this is implemented, savings of £1 billion will be
made and the average motor policy will come down by £40.
Huw Evans, director-general of the Association of British
Insurers, says that a 21 year-old’s policy will rise by
£1,000 and 30 million other comprehensive policies will
rise by £40 to £75 a year. Which is accurate, which is
correct and which, in the long run, will prove to be right?
-
My Lords, there are two distinct issues to be addressed in
this context. The reforms with regard to whiplash will, on
the basis of completed impact assessments, result in very
considerable savings in motor insurance premiums of the order
of £1 billion. It is estimated by the industry that this will
result in an average reduction in motor insurance premiums of
about £40. The major operators within the motor insurance
industry have undertaken to pass those savings on to the
motorist, the consumer. However, the changes in the discount
rate will inevitably impact on the cost of insurance,
including motor insurance, and that will give rise to certain
increases. One may offset the other, but I add that the Lord
Chancellor indicated when announcing the change to the
discount rate that this will be the subject of consideration
and indeed a consultation, which is due to commence no later
than Easter.
-
(Con)
My Lords, I begin with a declaration of interest: I do not
now practise as a personal injury lawyer but I have done in
the past. Does my noble and learned friend recognise that the
reduction in the Ogden tables to a discount rate of minus
0.75 will inflate the damages that are recoverable in
personal injury cases to an extravagant and unconscionable
extent, which is bound to inflate the numbers of fraudulent
or unjustified personal injury cases in motor claims to the
prejudice of all drivers? That being so, may I welcome the
fact that these proposals are going to be looked at again, I
hope constructively?
-
My Lords, the way in which the discount rate is calculated
will be examined with some degree of urgency. However, I do
not accept that the discount rate will result in the
inflation of the value of damages claims. It was designed
originally to ensure that those claims would be properly
calculated so that those who suffer life-changing injuries
are properly compensated for the future.
-
(Lab)
Does that mean that if the interest rate goes up, the
discount rate goes up? I am only following the noble and
learned Lord’s logic.
-
The discount rate is related to the rate of return on
government bonds, because there is an underlying assumption
that those who receive large damages awards for future care
will invest them in a very conservative manner, in bonds.
Therefore, as the interest rate drops, so the discount rate
will also drop.
-
(Con)
My Lords, I should declare an interest in that I practise in
this area. May I suggest to my noble and learned friend that
one way to get round this difficulty would be for the
Government to legislate to reverse the effect of Wells v
Wells, which was decided on the basis that a notional
investor would invest in gilts? That is not realistic and has
resulted in this extraordinary change to the discount rate.
-
My Lords, I agree with the observation that the level of the
discount rate reflects a very conservative assumption about
how a person would deal with a large lump-sum payment of
damages in order to protect their future position. That has
to be the subject of review, because it is clearly outdated.
-
(LD)
My Lords, surely the review and the consultation should have
come before the change in the discount rate, which is, as the
Minister has heard from around the House, absolutely
preposterous. As he knows, it is a fixed number based on
three-year index-linked government securities, a commodity in
which nobody who is investing funds for an injured claimant
will put their money—it is less than you would earn by
putting it into a local bank account. The fact that the
number is preposterous means a big increase in premiums for
motorists and a billion pound additional burden for the NHS,
as well as an unnamed additional burden for the Ministry of
Defence.
-
My Lords, I am glad that the noble Baroness acknowledges that
the basis of the calculation of the discount rate clearly
requires review. However, the Lord Chancellor was under a
legal obligation to deal with the discount rate and we are
now concerned to ensure that we consult fully and address the
question of how it should be calculated in future.
|
