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.
