Civil Liability Bill [Lords]

Debate between Bambos Charalambous and Kwasi Kwarteng

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

[Kwasi Kwarteng]

I am not an anatomist. I am not a biological specialist. I cannot give any scientific explanations for why our necks have become flimsier, or less sturdy, over the last 10 years. It may be related to obesity; I do not know.

This is, however, a serious issue, which has come up again and again over the last 15 years. As my hon. Friends have suggested, the number of claims has risen while the traffic accident rate has gone down. It is entirely legitimate for a Government, and, indeed, parliamentarians to ask what is going on. Something is not quite right. It is apparent that many people are making claims, which may or not be fraudulent—let us give them the benefit of the doubt—and clearly it often makes sense to an insurer to do a deal, as it were, and pay the money before the veracity or otherwise of the claim has been established, simply because the legal process would take too long.

[Bambos Charalambous]

Does the hon. Gentleman agree that by paying early, insurance companies are encouraging people to make these allegedly fraudulent claims?

[Kwasi Kwarteng]

The hon. Gentleman cannot have it both ways. It may well be the case that the companies are paying early, and clearly if they are paying early, people will be incentivised to make claims. The hon. Gentleman’s colleagues, however, are suggesting that no fraudulent claims are ever made, or that only a tiny proportion of claims are fraudulent. Logically, the more that insurers pay early, the more incentive there is to make a fraudulent claim. That is pure logic, and no great subtlety is required to appreciate it.

We have a problem. I think it entirely legitimate for insurers to pay out in order to forgo expensive legal costs. They have to manage their books and their businesses on a daily basis, and they will take a hit—if that is the right way to describe it—in order to facilitate business and manage cash flow. As we have heard throughout the debate, they are quite likely to make early payments, and as the hon. Gentleman has suggested, the more an insurer pays early, the greater incentive that gives someone to make a fraudulent or insubstantial claim.

[Bambos Charalambous]

Surely the answer is to fight those claims so that they do not succeed, and send the message that insurers will fight them and there will be no easy money for allegedly fraudulent claims.

[Kwasi Kwarteng]

If the hon. Gentleman were an insurer, managing a business on a daily basis, he would have to make a call every single day on which claims to fight and which not to fight. Often, for reasons of cost, the insurer will simply pay the money, without regard to the veracity or otherwise of the claim.

Civil Liability Bill [Lords]

Debate between Bambos Charalambous and Kwasi Kwarteng

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 4th September 2018 Commons Chamber

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

One of the fundamental principles of the legal system in England and Wales is equality before the law. This Bill skews things even further in favour of the insurance industry at the expense of the general public. It is yet another attempt by the Government to deny access to justice. It is an attack on victims of accidents at work and victims of road traffic accidents.

The insurance industry has been successful in lobbying the Government and already has a huge advantage over the general public thanks to various enactments by previous Conservative-led Governments. In 2012, the Government passed the Legal Aid, Sentencing and Punishment of Offenders Act, which took away legal aid for all personal injury claims and introduced fixed fees, with some costs having to come out of claimants’ damages. In 2015, the Government passed the Criminal Justice and Courts Act, which introduced the “fundamental dishonesty” defence allowing defendant insurance companies to have a claim dismissed if, on the balance of probabilities, the judge was convinced that the claim was fraudulent.

The insurers also set up “askCUE”—Claims and Underwriting Exchange— which, for a fee, can find those who are repeat claimants. The insurers also fund a unit at City of London police to help detect and prosecute fraudulent claims. Insurers have amassed quite an arsenal of weaponry to use against fraudulent claims, but they tell us that this is not enough and that there is widespread insurance fraud. I have yet to see any reliable figures that support that.

[Kwasi Kwarteng]

What does the hon. Gentleman say to people like me who have received emails from compensation claim companies asking them to commit fraud? Does he acknowledge that phenomenon?

[Bambos Charalambous]

In the cases of people who are willing to enter into a criminal enterprise with those companies, we should be going after the claims management companies. I would support targeting those, but not at the expense of attacking the public with the measures in this Bill.

Included in their figures of alleged fraud are people who have withdrawn their claims and those who have had their claims refused over the phone. Figures from the Government’s own Compensation Recovery Unit show that claims are at their lowest since 2009. Government measures are already working and the insurance industry is settling 99% of all road accident claims. This Bill and its measures are totally unnecessary and unwarranted.

As hon. Members have already stated, the increase in the small claims limit from £1,000 to £2,000 generally, and to £5,000 for road traffic accidents, is scandalous. If the Bill passes, claims for the same injury suffered by the same person will be treated differently because it occurred when in a car. How is that equality before the law? We should not forget that claimants are the innocent parties and would be suing someone for the negligence that caused their injury. If claimants are not able to secure the services of a solicitor, they may not succeed in their claim. That will deprive them of damages to which they should be entitled, and may well make things difficult. For example, an employee suing their employer for accident at work would find it very hard to do so without a solicitor.

Clause 1 of the Bill tries to define what a whiplash injury is, but seems to have done so without any medical references. It says that an injury is defined as whiplash if it is a “tear” or “rupture”

“of a muscle, tendon or ligament”.

This clumsy attempt to define whiplash fails to take into account the fact that many of these injuries can be debilitating, requiring serious and complex medical treatment. The definition also unfairly captures serious injuries that could result in the victim not receiving the proper compensation they are due.

Clause 3 then goes on to say that the Lord Chancellor will set the tariffs for compensation for whiplash claims. The draft tariffs seem to have been plucked out of thin air. There is no rhyme or reason when compared with the figures currently set by the Judicial College or the Government’s own figures for the criminal injuries compensation scheme. Under the current criminal injuries compensation scheme, if someone was hit by a driver who was then convicted of a criminal offence, and if they suffered whiplash for over 13 weeks, their claim would be worth £1,000; the Government would pay the claimant £1,000. Under the current proposals in the Bill, a claim for a whiplash injury of between three to six months recovery would be worth only £470. Why are the Government allowing insurers to pay less than half of what would be paid by the Government? The inconsistency is staggering and shows just how much the Government are willing to please insurers.

It should not be left up to the Lord Chancellor to set these tariffs. No explanation has been given for how these figures have been reached. It should be for the judiciary to set the tariffs, as they have daily experience of dealing with such evidence-based claims in court. If the Lord Chancellor is allowed to set these tariffs, figures for whiplash will be unlikely to rise if past performance of the criminal injuries compensation scheme is anything to go by.

Under the criminal injuries compensation scheme, a claim for a whiplash injury from which the victim took six to 13 weeks to recover was set at £1,000 in 1995. These figures have been revised twice—in 2001 and 2008—and the compensation rate of £1,000 remained unchanged despite inflation. In 2012, whiplash claims of six to 13 weeks were removed altogether, and the rate of £1,000 was available only for claims of over 13 weeks. If the figure of £1,000 had been index linked to the retail prices index since 1995, a whiplash claim under the scheme would have been worth £2,780.30 in today’s money.

Let me turn to part 2 of the Bill. Last year, the Justice Committee produced a report on the discount rate. The discount rate applies only to large awards of damages for victims who have suffered catastrophic, life-changing injuries that leave them in need of constant care, adaptations to their home and additional support. The Justice Committee recommended the setting up of an independent expert panel to advise the Lord Chancellor on setting the rate and said that the panel’s advice should be published in full. I can see no reason why the Government are trying to restrict the transparency of this process, and I invite them to amend this measure. I think we would all agree that the rate needs to be reviewed more frequently than it has been over a number of years, but three years is far better than five years, as it would ensure far fewer fluctuations in the figure.

It is also deeply concerning that the Lord Chancellor can take into account other factors than those defined by the Bill when setting the rate. This wide discretion opens up the setting of the rate to potential lobbying that could adversely impact the compensation of those who have suffered severe, catastrophic injuries. It is also worth noting that for the purposes of setting the discounted rate, the Bill changes the level of risk of an investment from “very low” to “low”. The lump sum to be invested is there to last for a victim’s entire life, so reducing the level of risk of the investment in setting the discounted rate is concerning, and it has not been properly explained.

This Bill does nothing for the innocent victims of personal injury. It is littered with inconsistencies, has parts that do not stand up to scrutiny, and loads the dice in favour of the insurance companies. The Bill will result in innocent victims of road traffic accidents being penalised because the insurance companies are unable to deal with the alleged whiplash fraud, which they cannot properly quantify. It is shameful that the Government have indulged the insurance companies to such a degree, to the detriment of innocent, law-abiding people. This Bill puts profit before people, restricts access to justice, and creates further inequality before the law. The basic principle that underpins our system of justice is being undermined. This Bill is plainly and simply unjust.