Insurer-led personal injury reforms certainly have been strong & stable

Let us compare the contradictions between the insurance industry’s position on the discount rate and on ‘whiplash’ reforms.

The discount rate is the rate used to calculate future loss in personal injury cases. It was recently reduced significantly from 2.5% to -0.75%. The reduction will have the effect of substantially increasing the value of personal injury awards, especially where the loss takes place over an extended period.

The ‘whiplash’ reforms were a set of reforms contained within the Prisons and Courts Bill which have been shelved by the snap election announcement. However, their general effect would/will be to prevent claimants from recovering any legal costs for most injury claims worth under £5,000 and to limit all compensation awards for injuries lasting up to 2 years to a fixed tariff scheme which would see the average award to claimants reduce by around 75%, with only £25 being offered for the majority of psychological injuries.

Clearly the discount rate reduction exposed insurers to much bigger damages payments on high value claims whilst the whiplash reforms would reduce the amount of low value claims by hundreds of thousands and reduce the compensation paid out by an estimated £2billion.

At first glance, there at least appears to be some balance between these two measures. However, within a day of the discount rate reduction, the bigwigs from every major insurer in the land had convened for a meeting at Downing Street and a consultation was quickly announced whereby the method for calculating the discount rate would be reviewed, obviously with a view to having it increased once more to reduce the insurers’ exposure.

Here is a summary of the Association of British Insurers’ position in respect of each:

Discount rate:                                                                      Whiplash reforms:

  • Govt needs to consult with experts to                          Govt should disregard expert views
    assess method of calculations                                       of judiciary & lawyers

 

  • Govt should immediately announce                            Govt should NOT first review last set
    consultation and ignore rate review                             of (LASPO) reforms from 2013 despite
    process which lasted over 6 years                                 previous pledge to do so

 

  • The previous discount rate in place                             Whiplash claims have been reduced
    for over 15 years was considered fair                           by insurer-led reforms in 2010 & 2013
    and never complained about by ABI                             but more changes are needed

 

  • Current reduced discount rate will see                        Reducing injury claims by <80%
    motor insurance premiums increase by                      & compensation paid out by billions
    up to £1,000                                                                          will see premiums drop £40

 

  • This discount rate needs increasing                            These reforms will reduce fraud (by
    to ensure that seriously injured claimants                obstructing / reducing genuine
    who will suffer significant loss over their                  claims!?) & will only affect
    lifetime are not ‘overcompensated’                             unnecessary low-value claims.

 

  • Re: claimants being undercompensated                    Whiplash claimants have been over-
    by absence of rate review for 15 years                        compensated for far too long &
    & how that should reduce premiums:                        increased insurance premiums
    [imagine tumbleweed crossing your screen]            (despite numerous previous reforms)

 

  • We want the rate/method reviewed to                       The fixed tariff scheme is necessary
    ensure ‘fair’ (read ‘less’) compensation                       to ensure that ‘fair’ (read ‘80% less’)
    is paid to claimants.                                                             compensation is paid to claimants.

 

In summary, insurers will say anything in order to achieve the same end result – less compensation paid out to claimants to make the civil justice system ‘fairer’ to the insurance industry.

 

 

 

 

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