Jeremy Lefroy MP has welcomed the introduction of the Civil Liability Bill into the House of Commons, following its passage through the House of Lords. The Bill makes significant changes to the personal injury compensation system. It will reduce insurance costs for ordinary motorists by tackling the continuing high number and cost of whiplash claims, and reforms how the personal injury discount rate ("PIDR") is set, aiming to ensure claimants get fair compensation to meet their expected needs, while reducing the pressure of excessive compensation claims on the NHS.
The Government’s view that claimants are being over-compensated under the current legal framework is based on work conducted by the Government Actuary’s Department. Work carried out on the evidence concerning how claimants invest their lump sums, suggested that, for a 30-year award, claimants received on average 135 percent of their intended award at the current discount rate. Even after an allowance was made for taxation and the costs of managing their investments, this level of over-compensation was still found to be on average between 120-125 percent.
The changes in the Bill will therefore generate important benefits for the NHS. The current PIDR rate of minus 0.75 percent means that the NHS is overpaying on claims for clinical negligence, putting increasing pressure on the public purse. During 2017-18 nearly £400m additional funds had to be provided to the NHS to meet the additional claims costs caused by the change in the PIDR rate. This is putting additional pressure on existing rises which are already eating into NHS budgets. The annual cost has almost doubled since 2010/11. Every pound that is being spent on over-compensation could be spent on frontline public services, such as the NHS, our schools or our Armed Forces.
The Bill will also generate savings for motorists and consumers. The high number and cost of whiplash claims, along with the current framework for setting the discount rate, is creating pressure that is driving up insurance premiums, particularly for motorists. Without reform motor premiums could continue to rise at a rate of about 10% annually. The whiplash reforms will deliver around £1.1bn of consumer savings per annum and could see motorists’ insurance premiums cut on average by about £35 a year.
Commenting, Jeremy said:
“This new legislation is welcome news and should ease pressure on NHS budgets. Over-compensation has had serious effects for too many years.”