The government is to reintroduce its personal injury (PI) reforms, it was confirmed this morning in the Queen’s Speech, provoking fury among claimant lawyers.
What was the Prisons & Courts Bill will not be reintroduced but there is to be both a Civil Liability Bill for the PI changes and a Courts Bill to progress court modernisation. Prison reform appears to have been dropped.
Also, the Financial Guidance and Claims Bill will take forward the plan to transfer the regulation of claims management services to the Financial Conduct Authority, and complaints-handling responsibility to the Financial Ombudsman Service.
However, there was no mention of changing the discount rate.
The government said the purpose of the Civil Liability Bill was to “ensure there is a fair, transparent and proportionate system of compensation in place for damages paid to genuinely injured personal injury claimants”. Conceivably this could encompass the discount rate.
But it went on to say that the bill would tackle “the continuing high number and cost of whiplash claims to put money back in the pockets of motorists through reduced insurance costs”.
The main elements of the bill are to “tackle the rampant compensation culture and reduce the number and cost of whiplash claims by banning offers to settle claims without the support of medical evidence and introducing a new fixed tariff of compensation for whiplash injuries with a duration of up to two years”.
This would appear to be a continuation of what was proposed in the Prisons & Courts Bill. Any increase in the small claims limit can be done by the Civil Procedure Rule Committee and does not need to be in the bill.
The government said motorists could see “on average savings of around £35 per year passed on through reduced insurance premiums” – down from the £40 that was previously promised.
James Dalton, director of general insurance policy at the Association of British Insurers, said: “Millions of motorists will welcome the government’s commitment to further tackle the compensation culture that is contributing to rising motor insurance premiums… It will be important to strike the right balance between the interests of claimants and those of premium-paying motorists.
“This bill also offers an opportunity that must be seized to reform the discount rate…
“Confirmation of tougher regulation of claims management companies cannot come soon enough for people who are plagued by unsolicited calls and texts. Disreputable firms are fuelling a compensation culture that contributes to higher insurance costs for many.”
Brett Dixon, president of the Association of Personal Injury Lawyers, countered: “The government continues to fire at the wrong target. Insurers are already making savings of £500m a year since the costs in personal injury claims were slashed in 2013.
“Meanwhile, the cost of motor repairs has risen by almost a third and the insurance premium tax rate has doubled.
“The government tries to appease motorists but, in reality, their right to redress when they are injured will be diminished in exchange for a promise of lower premiums which will not be kept.
“I urged the committee examining the proposals in the last session not to be taken in by the hyperbole prevalent in the sector about motor injuries and think how we as a society we would want to deal with someone who has been genuinely injured as a consequence of somebody else’s negligence.”
Simon Stanfield, chair of the Motor Accident Solicitors Society, said: “We’re disappointed that the new ministerial team at the Ministry of Justice have not taken the time to consider the implications of these proposals and work constructively to address some of the practical issues that the proposed legislation throws up.
“These reforms are unfair and fundamentally flawed in their rationale, and MASS will continue to make this case, whilst seeking to mitigate some of the worst consequences of the reforms.”
One of his predecessors, Donna Scully, a director at Carpenters, added: “Despite all the warnings about the likely consequences, the gaping regulatory holes and the unanswered questions about how it will work in practice, it appears that the government has missed an opportunity to engage on agreeing workable solutions and chosen once again to hurtle us down a path that will be predictably bad for the sector.”
Andrew Twambley, spokesman for lobbying group Access to Justice (A2J), said: “The nasty party has returned. If these reforms become law, 600,000 innocent people injured in car accidents through no fault of their own every year will have their rights taken away from them.
“If this bill becomes law, prepare for more cold-calling and for more holiday sickness scams. Don’t prepare for your car insurance premiums to go down. They won’t.
“The government’s proposals will simply open the door to claims touts and cold callers. There are better ways for MPs to resolve whiplash than simply doing what big insurers tell them to do.”
Vidisha Joshi, managing partner and head of PI at London firm Hodge Jones & Allen, said it would be “the young, the elderly, the mentally incapacitated, those with special physical and educational needs and those for whom English is not their first language who will be disproportionately hit by these reforms.
“It will also put more pressure on the NHS as well as employers, because injuries could well last longer than they would otherwise have done.
“The proposals are nothing short of scandalous – taking money from innocent accident victims and giving it to insurance companies and motorists, even though they actually affect all personal injury claims, not just road traffic related.
Qamar Anwar, managing director of First4Lawyers, described the news about PI reform as “disappointing, although not surprising”
“However, we are undeterred and will continue to fight these unjust proposals. The idea that motorists could save £35 a year through cheaper car insurance as a result is fanciful. There is no way of monitoring and enforcing it.
“The initial consultations about these proposals recognised that even the Ministry of Justice doesn’t expect insurers to pass on all the savings.
“Besides, the introduction of the increased insurance premium tax will put a stop to any hope consumers had of actually seeing their insurance bills cut…
“We call on the new justice secretary, David Lidington, to facilitate a meaningful and honest debate about what is right and wrong about how personal injury victims are treated, the way in which insurers operate and the importance of the whole sector coming together to stamp out fraud.”
He added that he welcomed tighter regulation of CMCs. “We’ve been calling for it over many years. The Financial Conduct Authority has a proven track record for dealing with financially-related firms and I suspect it may do a better job than the current regulators.
“However, we really would like to see more distinction made between the regulation of financial services CMCs and non-financial services CMCs as this will help all on the road to improved regulation of the sector.
“Only 4% of complaints about CMCs relate to PI, so it is a missed opportunity to better regulate bad practice by lumping the good, the bad and the ugly all into one.”
Michael Warren, managing director of Minster Law, said: “The data does not suggest there is a rampant compensation culture, and insurers themselves have said they pay out 99% of claims.
“The key focus for ministers should be on improving the claims experience for genuinely injured claimants, with elimination of cold calling, and investment in technology to reduce costs.”
Ian Davies, a partner at defendant firm Kennedys, welcomed the re-introduction of the PI reforms, adding: “The controversial decision to ban pre-medical report offers will have a mixed response among insurers in the absence of any further significant reform of the MoJ portal and we urge the government to remain mindful of not overly interfering with the commercial objectives of businesses.
“Overall, however, the devil as always will be in the detail and careful consideration of the proposals will be required to ensure the intended benefits are realised.”
Alistair Kinley, director of policy & government affairs at defendant firm BLM, said: “Changing the discount rate needs legislation and, post-election, perhaps the new minority government thought that spelling it out now was just too sensitive.
“That said, a very quick consultation in April and May had created a level of expectation of change that has not been answered clearly by the Queen’s Speech.”
But he suggested that the reference to the Civil Liability Bill ensuring “a fair, transparent and proportionate system of compensation” could be “code” for changing the discount rate.
He added: “Until there is greater clarity here, I fully expect to see very heavy lobbying by insurers to put this back at the top of the policy agenda.”
Stephen Hines, vice-pesident of the Forum of Insurance Lawyers, said: “Whiplash claims have shown no signs of falling and continue to be a very significant factor in motor insurance costs, so it is encouraging to see the wheels have now been set in motion in what is a very specific piece of legislation rather than as a small element of broader reforms.”
Tom Jones, head of policy at Thompsons, said: “This is a desperate government looking for headlines. This will actually take money from the NHS and the Treasury and give it to hugely profitable insurers with no guarantee at all of any return to the consumer.
“There is simply no evidence of a ‘compensation culture’: every government report has said it’s a perception, not a reality. The insurers have whipped up a ‘crisis’ whilst neglecting to mention that they have actually saved over £8bn since 2010.
“In the last Parliament, consumers were going to get a £50 reduction in premiums, yet now we are told the figure will be closer to £35. Another bill, another made up figure.”
The main goals of the Courts Bill are:
- To enable those charged with some less serious criminal offences to opt to plead guilty, accept a conviction and pay a statutory fixed penalty online. Defendants will need to actively opt into this process and could still choose to have their case heard in court instead.
- To introduce digital services which will allow businesses to pursue their cases quickly
- “To meet the demands of a modern justice system, by providing a better working environment for judges, allowing more leadership positions in the judiciary to be offered on a fixed term, and enabling judges to be deployed more flexibly to improve the opportunities for career progression”; and
- To put an end to the direct cross examination of domestic violence victims by their alleged perpetrators in the family courts and extend the use of virtual hearings.
- These reforms will result in “steady state savings to the taxpayer of £226m” once the reforms are implemented.