Motor Insurance (Whiplash)

Greg Knight Excerpts

Thursday 7th November 2013 Westminster Hall

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I am pleased to have the opportunity to debate the Transport Committee’s recent report on whiplash claims. It is the third report that we have produced on the cost of motor insurance since the 2010 election. Our work in the area started because of complaints about rising motor insurance premiums. In April 2012, the average quoted premium reached more than £1,100 and the premiums paid by young men and women were particularly high, at more than £2,000 for men aged between 17 and 24 years old. Although premiums have fallen recently in cost, they remain high, particularly for young drivers.

Many people need to use a car to get to work, to college, to hospital appointments or to visit family and friends. Public transport is not always available for such journeys, particularly outside towns and cities. The high cost of motor insurance can prevent people from owning a car, seriously affecting their work lives, education or social activities. It can also encourage people to drive without insurance or to commit other forms of fraud. The high cost of motor insurance is also a factor in the cost of living squeeze, which affects households across the land. Our reports have shown that there are a number of factors that influence the cost of motor insurance, including the high accident rates for young drivers, organised fraud, the merry-go-round of referral fees, uninsured driving, cold calling and the growth in whiplash claims. We have pursued all those issues, and most of them are being addressed.

We have repeatedly asked the Government to do more to improve the safety of young drivers—in particular, by making the driving test more rigorous or by introducing graduated licensing. It is appalling that 27% of 17 to 19-year-old males are involved in collisions within a year of passing their test. In 2011, 148 young drivers died. I look forward to the Government’s Green Paper on the issue, which is due soon.

The Competition Commission is examining possible anti-competitive practices by insurers on the cost of car hire and car repair, and I will be interested to see its recommendations and the Government’s response in due course.

[Sir Greg Knight (East Yorkshire) (Con)]

Does the hon. Lady agree that more could be done in schools? Teaching “The Highway Code” is not a compulsory part of the curriculum and what is taught from school to school is patchy. We could do more to educate young people about the dangers on public highways.

[Mrs Ellman]

I agree with the right hon. Gentleman. Young people’s attitudes before they are behind the wheel should be addressed as well. That might be done in schools or in after-school clubs.

Another area of concern that we identified, which is within the Minister’s remit, relates to the activities of claims management companies and, in particular, cold calling. We are told that cold calling is illegal, but the problem seems to be growing. We have all received phone calls or text messages urging us to make a claim because of an assumed or real recent accident. What action is being taken to clamp down on cold callers? Have any firms been prosecuted?

In our most recent report, we looked at another factor that explains the rise in the cost of motor insurance: claims for whiplash injuries. A whiplash injury is a soft tissue injury to the neck caused by a sudden, forceful jerk, such as can be caused by a road accident. Symptoms can last for a few weeks or months. In a minority of cases, symptoms can last for longer, especially if exacerbated by a pre-existing condition. There is no generally accepted test for a whiplash injury. They do not show up on X-rays or MRI scans. However, the medical evidence that we received confirmed that the injuries are real and can have debilitating consequences for those who suffer from them. There are about 500,000 motor insurance claims for compensation arising from whiplash injuries each year, although the number is coming down.

The official figures on road safety show a welcome reduction in the number of people killed or seriously injured. In 2012, there were a total of 195,723 casualties in all the road accidents reported to the police, which was 4% lower than in 2011. Some 1,754 people were killed—an 8% decrease from 2011—and 23,039 were seriously injured, down 0.4% from the previous year. Those reductions are welcome, but every individual serious accident is a tragedy for the individual and the family concerned. It is not clear, however, exactly how the number of claims relates to the number of accidents, as the statistics on road traffic accidents are not comprehensive. There is widespread agreement that a significant proportion of the claims are fraudulent or exaggerated, but there is no authoritative data, perhaps because of the very nature of the issue. The Government are right to be looking seriously at the problem.

[Mrs Ellman]

I fully agree with my hon. Friend. Indeed, I will shortly refer to that issue.

The Government proposed whiplash claims of up to £5,000, which would cover most of them, should be dealt with in court by using the small claims track. That approach was strongly backed by insurers, but rejected by most solicitors. The Transport Committee opposed that change, because many people who use the small claims track would have to represent themselves, and we thought that that would impair access to justice, especially as insurers would, of course, be legally represented. It was also not clear how expert evidence would be accommodated in the system. I am pleased that the Government accepted those arguments and rejected making that change at present.

We recommended the accreditation of independent medical practitioners to provide medical reports on whiplash claims. There have been claims that reports are of variable quality and that the doctors who issue them are not up to date with current requirements or are sometimes biased towards the claimant. I am pleased that the Government have accepted the recommendation in principle, although they have stated that they will enter into further discussion on implementing it.

We did, however, ask a number of other questions that have not yet been answered. For example, is there a role for existing regulatory bodies, such as the General Medical Council, in auditing or peer reviewing reports or dealing with complaints? Should practitioners who prepare reports be provided with information about the accident and the claimant’s medical record? We have written to the Ministry of Justice about those issues, but I welcome answers today if the Minister can give them.

We were disturbed to find that insurers frequently offer to settle claims before any medical evidence is submitted. My hon. Friend the Member for Blackley and Broughton (Graham Stringer) made that point. It would be hard to imagine a clearer incentive to making a fraudulent claim. The Government have said that they will consider prohibiting the practice. Can the Minister tell us what work is being done on that and whether it requires legislation?

We also recommended that the Government look at ways to make whiplash claimants provide additional information at the time of their claim, such as proof that they saw a medical practitioner shortly after their accident. Will the Minister give us his view on that? Will he also comment on the debate arising from the Summers case about whether the courts can strike out claims where exaggeration is proven, but where there has also been a genuine injury?

Those complex issues have been created by the dysfunctional motor insurance market. It cannot be good practice for insurers to settle whiplash claims without medical evidence. It is unacceptable that ways are still found for insurers, solicitors, doctors, garages, car hire firms and others in this merry-go-round to make money out of claims, often by inflating the work necessary to address them. For years, insurers have found ways to increase the costs paid by their rivals, and the result has been higher premiums for the ordinary motorist.

[Sir Greg Knight]

The hon. Lady’s Committee has produced an excellent report. Will she say something about the limitation period? At the moment, someone who suffers personal injury has three years within which to bring proceedings to a court. Does the hon. Lady agree that there is a strong argument for reducing that limitation period?

[Mrs Ellman]

I agree. Indeed, the Committee recommended a reduced period, but it appears that the Government response to the consultation and our report rejected that. That is an important point, and I would be interested to hear any comments the Minister can make about it.

I thank the Government for responding to our various reports and for accepting many of our recommendations, but there is more to be done. That includes effective working between a number of different bodies, including the Ministry of Justice, the Department for Transport, the Driver and Vehicle Licensing Agency and the Department of Health, as was agreed in the debate that we held in November 2011. Will the Minister explain what cross-departmental arrangements currently exist?

It is important for recommendations such as those from the Transport Committee to be based on evidence from all the interested parties. It was a mistake for the Government to listen only to the insurers at the summit that they held in February 2012, which excluded the views of those who represent the genuinely injured; indeed, as we pursue the issue of fraudulent claims, we must never forget the rights of genuinely injured people to compensation. The decision not to pursue the small claims track proposal shows that the Government’s summit, with its concentration solely on the insurers, was in fact a misjudgment.

Now that the Government have acted on whiplash, will the insurance companies be held to their promise to reduce motor insurance premiums? How will that be monitored? That promise was made at the summit the Government held at No. 10. When the Transport Committee asked the insurers who appeared before it about that promise, they said it had, indeed, been made. Will it be honoured? How will it be monitored?

We will continue to pay close attention to the cost of motor insurance, and we intend to report again early next year on the action that the Government are taking. Fraud and exaggeration should be minimised, but access to justice for the genuine claimant should not be impeded. Motorists want better-value car insurance and confidence that the system treats them fairly, as well as fair compensation if they are genuinely injured. We want to help that become a reality.

--- Later in debate ---

[Mr Vara]

If the hon. Gentleman would give me the opportunity to speak, he will find that I address a little bit later the disparity of numbers and what is a genuine whiplash claim now compared with what it was before.

It is worth noting that the proportion of road traffic accident claims that relate to whiplash has dropped to 58% recently. However, further study of Department for Work and Pensions statistics suggests that that is misleading and that a change in claims labelling may be responsible. Many claims are now labelled as soft tissue neck injuries when notified to the DWP. When those claims are considered with those labelled “whiplash”, the figure increases to around 87% of claims. Even though the number of accidents is falling, there has been a large increase in the number of personal injury claims, which is real evidence of a system crying out for reform.

[Sir Greg Knight]

As the effects of whiplash are normally felt within seven days of the accident and usually do not last more than a year, will the Minister address the point raised by the Transport Committee, which suggested that the period of limitation in such cases be reduced from three years to one year? If he cannot cover that matter today, will he write to me on that specific subject? There is a case for reducing the limitation period for these claims.

[Mr Vara]

I am grateful to my right hon. Friend for his comments. The Government did indeed consider that recommendation, but we do not intend to take any action on it. The limitation period is of long standing and applies to wider personal injuries than just those in road accidents. It is important to bear that in mind. This debate is specific to whiplash claims.

The Government accept that many claims may be genuine, but many speculative, exaggerated or even outright fraudulent claims are clearly being made. It is not right that people who cheat the system should get away with it and force up the price of insurance for honest, hard-working motorists. I make no apology for targeting the exaggerated claims of whiplash fraudsters to drive down premiums.

People seemingly now claim for whiplash injuries sustained in the most minor of incidents, and Government data show that more than 1,900 claims a day are made. According to the Association of British Insurers, the cost to the industry from whiplash claims is £2 billion, resulting in £90 being added to the average motor insurance premium. That is why the Government were committed to reducing the number and cost of whiplash claims at the Prime Minister’s insurance summit last year. We need to take action to tackle speculative, fraudulent and exaggerated whiplash claims, but we must not lose sight of the needs and legitimate expectations of those who have suffered a genuine injury. A reduction in the number of such claims will lower the costs for insurers, which will in turn allow them to continue to reduce motor premiums for consumers.

Motor insurance premiums are beginning to fall. Figures published by the AA’s British insurance premium index in October, as I said earlier, show that quotes for annual comprehensive car insurance have fallen by 12% over the past year. Incidentally, regarding some remarks made earlier by the hon. Member for Hammersmith, I refer him to what the Association of British Insurers said in oral evidence to the Transport Committee. The ABI said that it expects savings from the Government reforms that have been implemented to result in a decrease in insurance premiums.

That is a good start, but the Government fully expect insurers to continue to meet their commitment to pass on the savings from the Government reforms that are driving down the costs of civil litigation. In December last year, the Ministry of Justice launched a consultation seeking stakeholder views on the creation of independent medical panels to support better diagnosis of whiplash and options for increasing the small claims threshold for personal injury claims to £5,000.

The consultation closed on 8 March. I thank all the individuals and organisations who took the time and trouble to contribute. A healthy 292 responses were received from a wide range of stakeholders, providing the Government with a strong evidence base to inform our decisions for reform.

The Government published our response to the consultation and to the Transport Committee report, “Cost of motor insurance: whiplash”, on 23 October. Our response detailed the Government’s direction of travel on whiplash reform and announced a number of reforms to the medical evidence and reporting system for whiplash claims. Exaggerated and speculative compensation claims have helped force up insurance premiums, and such unnecessary and costly claims will be targeted by the Government’s new and robust medical evidence scheme.

The new system will ensure that only evidence from fully accredited medical professionals qualified to carry out thorough medical examinations can be considered when pursuing a claim, so people who aim to cheat the system will be deterred, while victims with genuine injuries can still get the help that they need. Improvements to the system to support medical experts will include an approved accreditation scheme, new best practice guidance, better accident information and access to medical records, where appropriate, and an improved medical report form to speed up settlements.

The Government are particularly pleased that representatives from the insurance, legal and medical sectors have put aside their differences and submitted a consensus approach to improving medical evidence and reports. Such a consensus can only be positive for all involved and provides the Government with a clear mandate for our reforms. We look forward to working closely with stakeholders to build an effective and rigorous new system on that solid base of agreement. Ministers plan to meet representatives from key stakeholder groups to outline the way forward and identify experts to work with officials on the detail of the new system. It is both important and sensible to involve industry experts when designing the detailed changes. Such input will be invaluable as we work up an appropriate and effective accreditation process, methods to control the use of pre-medical offers, robust examination techniques and best practice guidance and an improved medical reporting process and report form.

Details of the most appropriate funding method for the new scheme are still to be developed, but the Government believe that there are areas of common ground with the industry. We will talk to stakeholders about funding opportunities for meeting the costs of setting up and running the new system and for ensuring that the Government achieve our intention that such costs should not fall on the taxpayer. We aim to work at pace with stakeholders on those and other issues, and we intend to start implementing improvements to the system next year. I assure the hon. Member for Hammersmith that we are actively considering a timetable for implementation.

In addition to the work on the new medical reporting scheme, the Government will also work with stakeholders to improve the provision of data relating to whiplash. As the Committee indicated in its report, accurate data and statistics are needed to have a baseline to work from. Ministry of Justice officials will be working with colleagues in other Departments and with representatives from the insurance and legal sectors, including Claims Portal Ltd, to identify and compile baseline data. That will ensure that future work in this area can be underpinned by a robust evidence base.