The Ministry of Justice (MoJ) announced today that it is to press ahead with radical personal injury reforms aimed at curbing a “rampant compensation culture” – including raising the small claims limit and scrapping or capping general damages.
But with the detail still to be unveiled, they appear also to go further than expected.
The news comes less than a month since the Association of British Insurers said justice secretary Liz Truss had decided not to proceed with them at the moment.
Blaming a “predatory claims industry that encourages minor, exaggerated and fraudulent [whiplash] claims, driving up the costs of insurance premiums for ordinary motorists”, the MoJ said its consultation paper outlined plans to scrap the right to compensation or put a cap on the amount people can claim for minor whiplash injuries.
“Capping compensation would see the average pay-out cut from £1,850 to a maximum amount of £425.”
Other measures include:
- Introducing a transparent tariff system of compensation payments for claims with more significant injuries;
- Raising the limit for cases in the small claims court for all personal injury claims from £1,000 to £5,000; and
- Banning offers to settle claims without medical evidence. All claims would need a report from a MedCo-accredited medical expert before any pay-out.
The full details can be found in our separate report here.
The MoJ said the reforms could cut insurance premiums by about £40 a year and that insurers “have pledged to pass on savings to drivers – worth a total of £1bn”. It is not clear at the moment if there will be any mechanism to monitor or enforce this.
Ms Truss said: “For too long some have exploited a rampant compensation culture and seen whiplash claims an easy payday, driving up costs for millions of law-abiding motorists.
“These reforms will crack down on minor, exaggerated and fraudulent claims. Insurers have promised to put the cash saved back in the pockets of the country’s drivers.”
Economic secretary Simon Kirby said: “One whiplash claim is paid out every sixty seconds and it is unacceptable that responsible motorists have to pick up the tab.
“We are tackling the incentives which have created this compensation culture so that all drivers can save money on their motor insurance policies.”
Reactions from insurers and lawyers can be found in our separate story here.
The timing of the consultation could be related to the fact that next Wednesday will be the Autumn Statement; the plans were first announced at last year’s Autumn Statement.
The consultation will run until 6 January 2017.