Civil Liability Bill [Lords]

Debate between Bambos Charalambous and Chris Philp

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 23rd October 2018 Commons Chamber

[Chris Philp]

My hon. Friend is right—he makes exactly the point that I was about to come on to. Over about a decade in which accidents have reduced by 30% and cars have become safer, the number of claims has gone up by 40%. He asks why, and I think it goes back to qualified one-way costs shifting. There is a huge financial incentive for claimants to have a go—encouraged, of course, by claims management companies—in the hope that they can make a successful claim. Defendants, typically insurance companies, have rather irresponsibly taken the view that because defending one of these claims—probably successfully—will cost £10,000 or perhaps more, they should simply choose to settle, which may involve paying out £3,000 or £4,000, without bothering to defend the claim. Obviously word has spread both in the claims management community and among the wider public that people can simply make a claim and the insurance company will settle, because it is cheaper for them to settle a bad claim than to fight it. That has created the most extraordinary perverse incentives. Insurance companies have been seriously at fault, as they have set up this situation by paying out for claims with no merit, for understandable commercial reasons, but they have made a big mistake, and we now have to correct it through the Bill.

My hon. Friend asks why the number of claims has increased so dramatically. It is because claims management companies have been phoning around, encouraging the public to submit fraudulent claims, and I will elaborate on that in a moment.

[Bambos Charalambous (Enfield, Southgate) (Lab)]

The hon. Gentleman makes my point for me in saying that insurance companies are paying up on a regular basis. They are not even defending these claims, yet the Bill is designed to protect them. What does he say about that?

[Chris Philp]

The companies are not defending the claims because qualified one-way costs shifting makes it more expensive for them to successfully defend a claim than simply to pay it out. The system simply is not working.