Draft Civil Liability Act 2018 (Financial Conduct Authority) (Whiplash) Regulations 2021
Draft Whiplash Injury Regulations 2021
Debate between Alex Chalk and Pat McFadden(3 years ago)
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Alex Chalk
Yes, lots of interesting and fair questions. I am grateful to the right hon. Member for Wolverhampton South East for expressing himself as he has and for setting some of that initial context, which he did very fairly. I just want to develop that point before turning to his questions. As he rightly pointed out, the context of this is a worrying concern about what can only fairly be described as an explosion in whiplash claims, associated with grave concerns about the authenticity of a significant number of them. Only a brief look at some of the data could make one’s hair stand on end.
Alex Chalk
The right hon. Gentleman is very diffident on this matter. The latest ABI fraud data report for 2019 found that fraudulent motor claims are the most common insurance fraud, with more than 58,000 in 2019, valued at £605 million, which was up 6% on the previous year. However, City of London Police’s insurance fraud enforcement department achieved 433 convictions in 2019, totalling 239 years in custodial sentences arising out of this matter.
The point that the right hon. Gentleman was making is that this, of course, passes costs on to others, but it is worth taking a moment to dwell on how much we are talking about. The suggestion is that this will lead to savings of around £1.2 billion a year. None the less, his central point is a very fair one, which is to say, “Hang on a second; how can we be sure that these insurance companies will not simply pocket it and then up their profit margins, and the poor old consumer will not be reimbursed?” That is a fair challenge, but there are two limbs to the response to that.
The first part of the response is one that, bluntly, I did not expect to be able to update the House on today, but the impact of the pandemic—so cruel in so many ways—has unexpectedly shone a light on the likely behavioural response in certain regards. The right hon. Gentleman will be aware that during the pandemic people have driven their cars quite a lot less. As a result, there has been a lot of pressure from consumers asking their insurers for a refund on their premiums. It may be that there are people in this room who have done exactly that, so when you actually look at the data to see how the power of the market has had an impact upon premiums—nothing the Government can do, but simply the actions of consumers putting pressure on their insurers—it is quite instructive.
I will give an example of one provider, Confused. In the fourth quarter of 2019, the premium was £630. In the fourth quarter of 2020, it was £575. Similarly, another insurer, ABI, was at £483 in the fourth quarter of 2019, and £468 in 2020. In other words, the power of individuals going back to their insurers and saying, “You are going to have to reduce my premium on account of the fact that I haven’t been driving my car” has had a market impact. As such, I think we can take increasing confidence that there will be a consumer power to drive down these premiums, effectively telling the insurers, “The Government have taken these steps to ensure that there is less fraud taking place by way of whiplash, and we know that there are savings of around £1.2 billion, so pass them on to me or I will go elsewhere”.
Mr McFadden
The Government cannot just leave it to the consumer to have to take the initiative. The Minister is probably right that some consumers have approached the insurance companies because they have been driving a lot less this past year, but trying to phone any big company like that—I am not referring to any insurance company in particular—and get through the systems is not easy. I suggest that we need more from the Government. Surely there has to be some sort of pressure from the Government, some sort of deal here, so that if the Government are going to pass legislation like this, the very purpose of which is to save the £1.2 billion in payouts, then insurance companies have got to pass it on. Otherwise, what is the point of what we are doing here?
Alex Chalk
The hon. Gentleman should have waited for me to make my second point, because he has asked and he shall receive. Let me just finish off the first point. It is not a case of always having to phone the insurer to say, “I paid X, so now you should give me a refund.” The point is simply this: if insurance companies do not offer competitive premiums, people are likely to go elsewhere. The experience of the pandemic is precisely that: unless those insurance companies act in a way that is competitive, they are likely to lose business.
The second point is this. The right hon. Gentleman is absolutely right that we need to be holding insurance companies’ feet to the fire. Having made a firm commitment to pass savings on to consumers, insurers should be held to account. That is precisely why the 2018 Act includes a statutory requirement on insurers to provide information to the Financial Conduct Authority on how they have passed on savings.
Insurers must provide that information to the FCA by April 2024, as stated in the draft regulations, which I hope the right hon. Gentleman has had a chance to study. The Government, with the assistance of the FCA, will assess whether the industry has passed on the benefits of the reforms to consumers. A report will be made to Parliament after April 2024. That will be his moment to say, “Do you remember, Minister Chalk, when we were having that conversation in April 2021, you told me that the savings would be passed on?” We have ensured that the mechanism is built into the regulations to hold those companies’ feet to the fire.
With regard to the portal, the right hon. Gentleman asked whether a person’s GP could be considered. It is important to note that under all sorts of legislation, whether on medical negligence or road traffic accidents, we have to have the right medical expert for the particular issue to come before the court—or, in this case, with a bit of luck, not to come before the court. It has to be the right medical expert. Without any discourtesy to GPs, they are not always the right expert. If the GP has ensured accreditation under the system, there is no bar to the GP being that expert, but it is not always automatically the case that a GP would be able to provide the medical report, because that might not be within their realm of expertise. There is nothing unusual about that and certainly nothing unusual in the draft regulations so far as that is concerned.
How will data be handled? Data will be handled in the normal way. There is overarching legislation that covers that.
On the impact of taking lawyers out of the system, we make no bones about the fact that for a small category of case, it is more proportionate and appropriate to do precisely that. Let me quote what the Lord Chief Justice said about this. Characteristically, he put it very clearly and pithily. He noted that the tariff was a
“narrowly defined statutory derogation from the principle of full compensation through an assessment of damages by the courts”.
He was saying that the Government are deliberately carving out an area to do with road traffic accidents to ensure that, where additional costs are created that pass on additional expense to consumers, that is dealt with in a surgical way. I say “surgical” because vulnerable road users such as children, pedestrians and cyclists are not covered. That is an important exclusion.
Mr McFadden
For two reasons, I am grateful to the Minister for stressing that. First, those groups he mentioned—pedestrians, cyclists and so on—are not covered, and that is important. Secondly, the broader importance—I would be grateful if he can reassure us—is that this is a carve-out just for whiplash in road traffic accidents, and it will not affect injuries at work or other kinds of injuries in which the normal system of claiming through a court and having a judgment on the proportionality of the accident will take place. Some people, responding to the draft regulations, have said, “This is unfair, because you are treating one class of injury unlike another.” There is that argument, and I repeat it, but a lot of our constituents want to be reassured that the draft regulations will not have a broader ripple into their circumstances if, for example, they were injured at work.
Alex Chalk
That is critical. The Government believe in access to justice. That means that if people make their way to work and their employer has created an unsafe environment, so they trip over something and need to make a personal injury claim, they should not be crowded out—not shut out from making a claim. The draft regulations preserve precisely that.
I will address the issue of mixed tariff cases and bring my remarks to a close. Section 3(8) of the 2018 Act provides that, where a claimant suffers injuries in addition to a whiplash injury—the point that the right hon. Gentleman was making—the court is not prevented from awarding damages to reflect the combined effect of the injuries sustained. Ultimately, it is for the courts to determine how mixed injuries are addressed. We are confident, given the excellence of our judiciary, that they are well placed to resolve such cases on a day-by-day basis.
In conclusion, the draft regulations are proportionate, calibrated and targeted measures that serve the public and consumers’ interests, drive down on fraud and act to drive down insurance premiums. They are manifestly good for the public and for road users. I commend them to the Committee.
Question put and agreed to.
Draft Whiplash Injury Regulations 2021
Resolved,
That the Committee has considered the draft Whiplash Injury Regulations 2021.—(Alex Chalk.)