It’s a move that many in the insurance industry have been eagerly waiting for – and today it became official.
The Civil Liability Bill has officially received Royal Assent today (December 20) marking a reform of the way England and Wales addresses whiplash claims and the framework around which the personal injury discount rate is set. Its aim is to reduce the “excessive” compensation claims impacting the NHS.
The discount rate was adjusted, amid much insurance industry controversy, back in March 2017 when it was slashed from 2.5% to -0.75%. Now under the measures of the Civil Liability Bill, the 100% compensation principle will be retained but the calculation of the discount rate has been altered to reflect how claimants invest money. It has been established that the Lord Chancellor must set the discount rate at least every five years after taking independent advice – the first review is expected within 90 days.
“Royal Assent of the Civil Liability Bill is a victory for common sense over the UK’s compensation culture,” said Rob Townend, MD of Aviva UK general insurance in reaction to the news in a statement issued to Insurance Business. “For too long, honest motorists have paid for a broken system which rewards fraudsters, claims management companies and injury lawyers at the expense of honest motorists.
“The Civil Liability Act will help make motor insurance more affordable, will reduce the number of injury-chasing nuisance calls, and will make our roads safer by removing the financial incentive for crash for cash fraudsters. Importantly, the new law allows insurers to focus on those with genuine injuries and claims, and ensure we help them when they need us most.
“Aviva, like most insurers, will pass on 100% of the savings from this new law to our customers.”
Under the legislation, whiplash measures are expected to provide a “tariff of compensation” for pain, suffering and loss of amenity for claims – courts will be able to increase compensation awards under the tariff. A ban will also be introduced on those looking to settle whiplash claims without the appropriate level of medical evidence.
“Having enacted this legislation, an increase to the small claims track limit is now needed to reduce the cost of whiplash claims by limiting lawyers to claims where their expertise is needed,” added Townend. “This limit hasn’t increased since it was first introduced in the ‘90’s. For every £1 insurers pay in compensation, another 50p goes to lawyers.”
When the move passed through the House of Lords in November, Catherine Burt, the national head of the counter fraud team at DAC Beachcroft Claims Ltd., did, however, express some concerns about solicitors potentially choosing to leave the market.
“I can see the portal is a really good idea from the industry’s point of view - the whole point is settling claims as cheaply and quickly as possible,” said Burt, as quoted by Law Gazette at the time. “I share the concerns about how we are going to deal with fraud in that process, unless there are checks built into it. Insurers will have to be on top of their game to detect fraud and deal with it.
“We are going to have a look at some form of AI with dynamic fraud detection built into it. We have done a lot of work on knowing who our opponents are, but the claims solicitors are moving out of the market and we don’t know who is coming up behind [or] the information that we need to defeat [fraudulent] claims.”