Prisons and Courts Bill (First sitting)

Craig Tracey Excerpts

Committee Debate: 1st Sitting: House of Commons
Tuesday 28th March 2017 Public Bill Committees

[Robert Jenrick (Newark) (Con)]

May I also declare an interest? I am a solicitor, not currently practising, and a prison visitor at HMP Lowdham Grange in my constituency.

[Craig Tracey (North Warwickshire) (Con)]

I chair the all-party group on insurance and financial services and was an insurance broker for 25 years.

[The Chair]

I am afraid that brings us to the end of the time allotted for the Committee. I thank the witnesses on behalf of the Committee for their evidence.

Ordered, That further consideration be now adjourned. —(Guy Opperman.)

Prisons and Courts Bill (Second sitting)

Craig Tracey Excerpts

Committee Debate: 2nd Sitting: House of Commons
Tuesday 28th March 2017 Public Bill Committees

[Richard Burgon]

Q Finally, I would like to ask each of the panel members, starting with Brett, why, in your opinion, the Government do not seek to better regulate claims management companies, which unlike solicitors are free to cold call potential customers?

Brett Dixon: In my opinion, the Bill is a missed opportunity to deal with the real drivers of these types of claims, and that is claims management companies. I can see the argument that, in some respects, if you do not regulate claims management companies—which we would firmly support—and you do not ban pre-medical offers and cold calling, you are creating a circumstance where someone who does not have a genuine claim might see this as a one-way bet. By that I mean that you might be encouraged by a claims management company to make a claim. I am told that insurers make pre-med offers without any medical evidence and you can, in effect, make it up and not be able to be called to account, because you can stop before there is medical evidence. If you take rogue claims management companies out of the equation and ban this insurance-led practice of making pre-med offers then I think you deal with most of the problems in the sector that we are hoping to deal with through the Bill and maintain the position of the genuine claimant who wants access to justice.

[Craig Tracey (North Warwickshire) (Con)]

Q I shall start with you, Mr Dalton. Obviously, the Government are keen to get a definition of whiplash in the Bill, and I think it will be key to this being successful that we get that definition right. Does the current framework definition hit all the right spots, or should we be looking at something else?

James Dalton: This is a critical point. Clause 61 defines whiplash: we have some significant concerns, which go to my earlier comment that the definition does not adequately include cover for back injuries: it includes neck and upper torso but does not include back. We think that is a really important part of the jigsaw that needs to be included within this legislative framework, so that you capture the right type of claims. The risk if you do not do that is that whiplash injuries will become back injuries and they are not covered by this legislation.

Rob Townend: I have the same answer, really. We do not want to see a loophole where back is excluded and you end up with two systems, one for neck and upper torso and one for back. It adds complexity and reduces the number of claims that are caught by the legislation by about 60%.

Brett Dixon: Clause 61, particularly clause 61(1), does contain provisions for further regulations. I think it is important to understand what is intended in the regulations and how that would interact with it. I sound one note of caution as a practitioner: it would be within the realms of a medic or a medical expert to define what whiplash is. If you were to ask a medic, or you were to ask a lawyer to give a go at what a medic would say, they would say it is soft tissue injury to the upper torso and neck that has been caused by hyperextension or hyperflexion. The mechanism is as important: some thought needs to be given to involving a medic in the way that regulations are drafted. That is the most important point.

[Craig Tracey]

Q What about the MedCo definition?

Brett Dixon: The MedCo definition is something of a work in progress in many respects. There is a definition there that has been imported into the civil procedure rules and this draws in part from it. Just because it exists in the civil procedure rules and is used for MedCo does not mean that this is either a good starting point or the way to go. This is an opportunity to define it properly by using and involving medics.

[Craig Tracey]

Q What are the consequences to insurers if you get the definition wrong, in terms of additional cost? Has there been any analysis of how much more that will cost insurers?

Rob Townend: You will see displacement of claims from purely neck injuries to back injuries. The analysis we have done suggests that 60% of the claims that are currently wrapped under small soft tissue injuries will drop out. Without the displacement impact, where people will claim, I think it gives a loophole for fraudsters and I do not think it will help to reduce nuisance calls.

[Craig Tracey]

Any other thoughts?

James Dalton: No. I think the revised regulatory impact assessment from the Ministry will be extremely important for understanding the extent to which this definition will deliver the Government’s anticipated savings. Because I do not think it will, for the reasons I have already explained. So if we do stick with this definition, the regulatory impact assessment should show that.

[Craig Tracey]

Q That brings me to the cost. We have already said that Aviva has said that it will pass on the cost, as have other insurers. It was based on a £40 figure, wilfully, at the time, but I think that figure was based on the complete removal of soft tissue injuries. Has there been a re-evaluation of likely cost? What is the impact on other things such as insurance premium tax rises and discount rate changes, which we will obviously see? You can pass on a saving but that does not necessarily mean a lower cost.

Rob Townend: Let me deal with the exclusion of back, which has the biggest impact in terms of how the definition is written. Having a tariff instead of removing damages in its totality has a smaller impact. I think our analysis—we can share it properly with the Committee—was £4 or £5. So the bigger impact is in the reduction of back. The second part of the question was—

[Craig Tracey]

It was around other impacts such as IPT rises.

Rob Townend: The environment around motor pricing at the moment is really dynamic. IPT has been going up and the discount rate has significant impact on premiums for larger injuries. Adding these together, the opportunity to offset premium increases with a reduction in the cost of whiplash claims would be beneficial to consumers.

James Dalton: We have been very public about our view that the decision to reduce the discount rate to the extent that it has been reduced is absurd. There is a very important need to reform the system and we look forward to seeing the Government’s consultation on that in due course. Inevitably that has already led to increased car insurance premiums and an increase in the insurance premium tax. This makes it even more important to progress these reforms in order that premiums will not go up as much as they would were you not to proceed with these changes.

It comes back to the society question: do you want to live in a society where you have a claims culture and compensation system that drives the sort of behaviours that Rob Townend was describing earlier. I think the answer that most consumers give to us is that they are sick and tired of the cold calling and the text messages. This is the system that drives them.

[Nick Thomas-Symonds]

Q I have two points, Mr Brady, and the first is to Brett Dixon. The small claims track limit of £1,000 has been there since 1999. If you increased it by the same rate as the consumer prices index, you would end up with just under £1,500. If you increased it by the same rate as the retail prices index, you would end up with just under £1,600. Do you think there is any justification for going to £2,000 in most cases and £5,000 in whiplash cases?

Brett Dixon: I do not think there is any justification for it, to be perfectly frank with you. The use of a small claims track system is to identify those claims that somebody can deal with on their own, rather than it being about a monetary value. If you introduce changes to the small claims track at the same time as altering the court system to provide hearings at a distance—video evidence—you are going to make it incredibly difficult for a litigant in person to deal with and understand all those issues on their own.

Remember, the defendant who has paid an insurance premium has a right to call on those insurers to provide them with legal representation. I always think of it as being the person in the dentist’s chair on their own—that is what you would be as a litigant in person against well-represented opponents. I think that there is no justification, either monetarily as you have put it, or on the basis of the purpose of a small claims track.