Royal Courts of JusticeThe Justice Secretary and MP for South West Hertfordshire, David Gaulke has introduced the new Civil Liability Bill that is designed to cut the cost of motor insurance premiums by reducing the cost of personal injury claims to insurers, reduce the burden on the legal system and on the NHS.

In introducing this bill the Government is seeking to address the spiralling costs of personal injury claims on both motorists through their car insurance premiums and what it considers to be the unrealistic number and level of “whiplash” claims or soft tissue injuries as they are more formally know.

The Impact Assessment produced by the government describes the issues as follows;

The Government is concerned about the continuing high number and cost of road traffic accident (RTA) whiplash related claims, many of which are minor, exaggerated or fraudulent, and the impact these claims have on motorists through increased motor insurance premiums. The Government is of the view that the amount of compensation currently paid to claimants for these claims is out of all proportion to the level of injury suffered. Government action is needed to provide a more proportionate approach to the payment of compensation for Pain Suffering and Loss of Amenity (PSLA) and ensure all claims are supported by medical evidence, which will reduce costs for motorists. The Government is also concerned about the costs associated with other personal injury claims.

The Impact Assessment states that the changes will save UK motorists, on average, £35 per year.

David Gaulke, the Justice Secretary said;

The number of whiplash claims has been too high for too long, and is symptomatic of a wider compensation culture.

We are putting this right through this important legislation, ensuring whiplash claims are no longer an easy payday and that money can be put back in the pockets of millions of law-abiding motorists.

The new Bill will attempt to tackle the seemingly ever increasing number of claims by setting fixed amounts of compensation for whiplash claims and banning the practice of seeking or offering to settle whiplash claims without medical evidence.

The Civil Liability Bill will also change the away that  personal injury discount rate, the Ogden Rate, for serious injuries is calculated. The rate was adjusted in February 2017, from 2.5% to minus 0.75%, a change that had a huge impact on insurers reserving policies for existing and new personal injury claims. Almost immediately the Government appeared to accept claims from the insurance industry that the effect this had upon awards was unjustified and that the system needed an overhaul.

The new Bill addresses this, intending to create a better and fairer system of calculating the discount rate that will

  • set the rate with reference to ‘low risk’ rather than ‘very low risk’ investments as at present, better reflecting evidence of the actual investment habits of claimants;
  • establish a regular review of the rate, the first within 90 days of the legislation coming into force and at least every three years thereafter;
  • establish an independent expert panel Chaired by the Government Actuary to advise the Lord Chancellor on the setting of the rate.

Insurers have broadly welcomed the introduction of the Bill and have pledged to pass on savings made as a result of the changes to policyholders.

It is worthy of note that whilst the changes are couched in the terms of “whiplash” and “car insurance”,  the changes that apply to soft tissue injuries will also affect other classes of liability claims e.g.  public liability, employers liability.

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