There has been much debate surrounding the new Civil Liability Bill which aims to reform whiplash claims and the basis for the calculation of the discount rate.
In March 2017 the Lord Chancellor, Elizabeth Truss, boldly reduced the discount rate from 2.5% to -0.75%. Whilst it was widely acknowledged that the rate of 2.5% was too high, the slide to - 0.75% was a cause of considerable concern for the insurance industry.
The discount rate is now due to be altered again, with many commentators concluding it will probably be fixed at a rate ranging between 0.75 and 1%.
The Civil Liability Bill also widens the definition of a whiplash injury. Whiplash was previously defined as an “injury resulting from a sudden sharp whipping movement of the neck and head”, typically resulting from a road traffic accident. This definition has now evolved to be more specific, including strains, sprains, muscle rupture and damage to tendons or ligaments. The Bill has also introduced the need for medical evidence to be disclosed before any offer can be made by a defendant.
Running parallel to the Government’s reforms for whiplash is the proposed increase in the small claims limit, which is to be extended from £1,000 to £5,000. For other personal injury claims, it is to rise from £1,000 to £2,000. It will not be possible for claimants to recover their fees for claims which fall within these parameters, thereby causing them to recover lower levels of damages.
In the face of fierce criticism, the Government has now dropped controversial plans to include vulnerable road users in the £5,000 limit. These users included cyclists, motorcyclists, horse riders and pedestrians.
The Government has estimated that the above reforms will reduce motor insurance premiums by around £35 a year. Despite insurers’ promises regarding these savings, the claimant fraternity remains sceptical and has raised concerns as to how they might be policed.
The Treasury may oblige insurers to provide information on the promised reduced premiums to the Financial Conduct Authority (FCA). It would then report back to Parliament with the help of the FCA, although the reports are not expected until 2024/2025, several years after the likely implementation of the reforms.