Motor Insurance (Whiplash)

Debate between Greg Knight and Shailesh Vara

Thursday 7th November 2013 Westminster Hall

[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.