Government has prioritised premiums over compassion, solicitors argue
The Ministry of Justice (MoJ) unveiled sweeping reforms to whiplash claims and the discount rate this week in its Civil Liability Bill.
Justice Secretary David Gauke said the Bill would reduce the ‘unacceptably high’ number of whiplash claims, cut motorists’ insurance premiums by about £35 per year (by saving insurers about £1bn) and make savings for the NHS.
The Bill introduces fixed amounts of compensation for whiplash claims, potentially making them uneconomic for lawyers to pursue, bans payouts without medical evidence and changes the personal injury discount rate calculation.
In February 2017, the discount rate (the percentage used to adjust lump sums awarded for future loss) was reduced from 2.5% to -0.75%, increasing the size of awards. Under the Bill, the rate will be set on a ‘low risk’ rather than a ‘very low risk’ basis; it will be reviewed within 90 days of the legislation coming into force and thereafter at least every three years; and an independent expert panel chaired by the government actuary will advise the Lord Chancellor on the setting of the rate.
Julian Chamberlayne, partner at Stewarts Law and chairman of the Forum of Complex Injury Solicitors, said: ‘We are still in the dark on the question of what proportion of claimants does the government consider it acceptable to go under compensated as a result of the new “low risk” investment approach. All we are told is that they accept the median approach would be too much under compensation. But is it okay for 10%, 20% or even 30% to have their compensation run out early and fall back on whatever help they can get from the State?’
However, he added that it was difficult to see how the rate could now be set higher than 0% once tax, inflation and investment charges are factored in.
Brett Dixon, president of the Association of Personal Injury Lawyers (APIL), said the government had sacrificed ‘any concept of fairness or compassion or help for genuinely injured people’ in order to cut car insurance premiums.
James Bell, partner at Hodge Jones & Allen, said: ‘We need to remember that seriously injured people, many with long term care needs, were undercompensated between 2001-2017 when the discount rate was set at the insurer-friendly figure of 2.5%.
‘The insurers made hay while the sun shone for 16 years. So, it is very disappointing to see the government rush through this legislation after only one year of the rate being set at -0.75%.’
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