Whiplash & discount rate reforms delayed

Earlier this year, we contrasted the media reactions to two significant legal developments as they unfolded.

The first, a long overdue correction to the ‘discount rate’ applied to the settlements in the most serious personal injury cases, had been debated and stalled for years but was met with shock and outrage from insurers and gathered headlines across news, business and finance pages in the national press.

The second, a fundamental change to a common law right to be compensated for injuries caused by another party, was whisked through consultation, past the Justice Select Committee and into a parliamentary bill in a matter of weeks, with barely a murmur.

Since then, a new Lord Chancellor has promised legislation that will allow for his successors to reset the ‘discount rate’ regularly, on the advice of a panel of diverse and independent experts. The parliamentary bill to establish the new mechanism has yet to emerge, and the insurance lobby is growing impatient.

However, David Liddington has revealed that it will maintain the principle of 100% compensation, will use “low risk” as opposed to “very low risk” investments as a benchmark and will review the rate every three years.

Among many measures in the Prison and Courts Bill which ran out of parliamentary time when the snap election was called, the ‘whiplash’ reforms made the headline summary of the Civil Liability Bill included in the Queen’s Speech. Clearly, neither piece of legislation is likely to find its way before parliament until well into 2018, which would make implementation next year unlikely. Such a timetable isn’t going to satisfy insurers though, who are already pressing the Lord Chancellor to adjust the ‘discount rate’ again, before the new process is established.

Necessity is the mother of invention

Should you need proof that creativity is spurred on by adversity, look no further than the legal expenses sector. ARAG is rolling out new products, taking technology in new directions, and helping grow new business for our partners. All this, despite the challenges on both the political and legal landscapes.

Fee caps, whiplash reforms, increases in small claims levels plus Brexit, place special demands on our resources and business model. Because of this, we have already rebalanced our BTE and ATE portfolios and are able to actively seek new business from a variety of sources in both BTE and ATE sectors.

On the face of it, this is a complicated recipe with which to progress our second decade in the UK. However, nothing has changed in our philosophy of opening the doors to justice for everyone, whatever their financial status. The consistent accolades at awards ceremonies confirm our belief in the highest standards throughout the organisation: our by-words remain innovation, flexibility and service.

Elsewhere in this issue of the RAG we have a lot to say about the Insurance Distribution Directive, BTE developments and the need for employers to reconsider their commercial policies (CLP) now that employment tribunal fees have been scrapped. CLP has proved an enormous growth area, along with assistance services, and we aim to keep all BTE products affordable whilst providing top level cover and service. ARAG will meet the challenges of the market with solutions that benefit all our partners and policyholders.

Upcoming test cases will untangle some of the current impasse over clinical negligence settlements and we will ease some of the current solicitor ‘malaise’ through a new advanced disbursement product, aiding their cash flow.

Housing disrepair continues its strong growth and we are looking to more debt recovery and professional negligence for matrimonial business. Closer ties with solicitors through the pre-paid disbursement product will help introduce ARAG as the ideal partner for employers’ liability and motor business too. We already have our Practice Policy that covers all ATE cases in a firm.

I am pleased to say that we shall continue pursuing clinical negligence claims at the current level. And aft er the hysteria over discount rates earlier this year, insurers and government are getting closer to a more balanced view with a final figure that looks like it will be fairer to claimants.