The contrasts between two recent pieces of government intervention that will impact the insurance industry could hardly be starker.
First, the Ministry of Justice announced its plans for the claims process, which include small, fixed awards for ‘whiplash’ injuries and increasing the Small Claims Court limit to £5,000 for motor accident claims. Then, within days, the Lord Chancellor, Liz Truss, dropped the apparent bombshell that the discount rate applied to serious injury claims would be reduced, from 2.5% to minus 0.75%.
The first reform, which will severely limit access to justice for many quite genuinely injured motorists, have major consequences for the courts and parts of the legal profession, while probably failing to hit its questionable target of claims fraud, was buried under the bigger news of the extensive Prison and Courts Bill.
The second, a long overdue adjustment to the way in which compensation payments to the most seriously injured victims of motoring, medical and other negligence are calculated, largely at the expense of insurers and the NHSLA, was met with the level of response usually reserved for major natural disasters.
The railroad timetable
One would be forgiven for thinking that the change to the “discount rate” applied to large personal injury awards, came entirely out of the blue. While the extent of the swing may have surprised many, the original MoJ consultation on the inadequacy of the existing formula, unchanged in over 16 years, closed in the summer of 2012.
The Lord Chancellor has only been compelled to change it now under threat of judicial review, overcoming legal action by the ABI attempting to delay her announcement.
Contrast this with the timetable for the Whiplash reforms which, while the subject of intense lobbying for some years, must have broken records for the speed with which they covered the ground between consultation and the MoJ’s decision.
Launched in mid-November, the Reforming the Soft Tissue Injury (Whiplash) Claims Process consultation was widely criticised for being open for just six weeks and closing immediately after the Christmas break.
It was almost as if the MoJ didn’t want too much rigorously gathered evidence and carefully considered expert opinion to ignore.
In the following six weeks, the MoJ managed to digest all of the responses, consider options and announce its plans, in spite of warnings from senior judges and a mauling in the Justice Select Committee at which it was accused, by the Committee’s chair, Conservative MP Bob Neill, of “firing in entirely the wrong direction”.
Winning the media war
The difference between the media coverage of the two reforms has also been stark. Barely mentioned outside the insurance and legal trade press, the whiplash reforms made just one, 11-word sentence (paragraph 19) in the BBC’s online story about the Prison and Courts Bill.
So much for making fundamental changes to citizens’ common law rights.
The “crazy” discount rate adjustment, prompted a succession of articles across the mainstream media, largely towing the ABI top line that premiums would have to go up, as representatives of various insurers descended on the Treasury to lobby the Chancellor, Philip Hammond to have the decision reversed.
For all the wailing about premium hikes that they say insurers will be forced to pass on to motorists, it would be easy to forget that the victims of motor accidents, whether their injuries last a few months or the rest of their lives, are often their customers too.
Those who will hopefully benefit from the discount rate reform are among the most vulnerable in our society. Children injured at birth and motorists left paralysed after an accident may now have the money to fund their care adequately, as they age.
The clamour to denounce this as “crazy” looks neither compassionate nor compatible with the social responsibilities that most modern businesses claim to uphold.
