Civil Liability Bill [Lords]

Kwasi Kwarteng Excerpts

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

[Chris Philp]

Let me finish the point, then I will take an intervention.

[Kwasi Kwarteng (Spelthorne) (Con)]

My hon. Friend never gives way.

[Chris Philp]

I will give way in a moment. The hon. Member for Jarrow also said that judges have decided that injuries—[Interruption.] I am grateful for the heckling from my own side. The hon. Member for Jarrow said that judges had made these compensation awards, but of course that is not true: under qualified one-way costs shifting, insurance companies have a massive financial incentive to settle even claims without merit before they go to court, because even if they win they pay the costs and the costs are often much bigger than the value of the claim. So insurance companies simply settle the claim without a medical examination and without it ever going to court. Therefore, all these compensation claims have not been adjudicated by a judge, although the hon. Gentleman erroneously suggested that they had; they are simply settled immediately because that is the cheapest way of doing it. There is no judicial intervention in almost any of these cases.

--- Later in debate ---

[Kwasi Kwarteng (Spelthorne) (Con)]

Several issues have been raised in this important debate, but I wish to address two main points. Whiplash claims have been a chronic problem in British insurance and road usage for some time. Eight years ago, I joined the Transport Committee, and I served on it for three years. We looked into the issue more than once and found that whiplash claims had gone up in England, so we looked across Europe. What has not been mentioned in the debate is that were Members to look at whiplash rates across the continent of Europe, they would be astonished at how low the incidence of whiplash is. The Transport Committee looked at the issue, including whiplash rates in Germany, five years ago. [Interruption.] I notice the newly appointed Whip, my hon. Friend the Member for Milton Keynes South (Iain Stewart), nodding in agreement. He served on the Committee as well and will remember that we looked into whiplash in Europe and were astonished at the low incidence of claims across the continent. That cannot be because somehow the necks in Germany are more robust than those in Britain. It cannot be a question of Germans being physically different from people in Britain. The case was clearly made that we had a problem with whiplash claims that was specific to the United Kingdom.

My hon. Friend the Member for South Norfolk (Mr Bacon) mentioned the fact that Aviva issued a report more than 10 years ago. Yes, I know that Aviva is a bad, evil insurance company that makes profits, that is successful and that employs people—I know that that is all to be deprecated—but the fact is that its report suggested more than 10 years ago that there was a problem with whiplash. The facts speak for themselves. The idea that over 10 years we could have a 30% reduction in accidents and yet a 40% increase in whiplash claims seems incredible. It cannot be the case that they are inversely correlated. It cannot be the case that as there were fewer accidents, we would have more whiplash claims from accidents. That does not make any sense whatsoever. I am afraid that the Opposition Members who have spoken have failed to address that.

Given the fact that the Transport Committee looked into the issue four or five years ago and that people issued reports more than 10 years ago about whiplash being a problem, and given that we know—as Opposition Members acknowledge—that unscrupulous claims companies are cold calling people, I suggest to Opposition Members that they cannot have it both ways. It cannot be the case that the whiplash increase is simply a scare story whipped up by the insurance industry and at the same time the claims companies are cold calling and being equally unscrupulous. It has to be one or the other. The insurers cannot be suggesting that it is fraudulent while compensation claims companies are at the same time pushing fraudulent claims. The two go together.

The Bill is timely; indeed, it is long overdue in respect of the measures on whiplash claims. My hon. Friend the Member for Croydon South (Chris Philp) was quite right that it cannot simply be a blank cheque for insurers. The Government have to look more closely at how the insurance companies are going to pass on some of the perceived and anticipated benefits of reducing whiplash claims and ultimately reduce premiums for consumers. I fully appreciate that in many ways it has been quite a difficult time for the insurance industry. Insurance premium tax has gone up from 6% at the beginning of the decade to 12%. That is greater taxation. Some of us have argued against such steep increases, but those increases have happened. The idea that, somehow, the insurance industry is a den of profiteers or a wicked industry that acts against the interests of our constituents is silly; it is a crazy idea. It is a very successful British industry, and something that we should be supporting. It is one of a number of industries—not a huge number of industries—in which we are world leaders, so it is very disappointing to hear, once again, the industry being denigrated by Opposition Members.

[Chris Philp]

The hon. Member for Hammersmith (Andy Slaughter) said that, at £250 million a year, the insurance industry was making excessive profits. Bearing in mind that there are 25 million cars in the UK, that works out at a profit of £10 per insurance policy. That is hardly profiteering, is it?

[Kwasi Kwarteng]

I would not have thought that it could be described as profiteering. It is a legitimate business. I know that many Opposition Members do not even believe in private enterprise or business. [Interruption.] They do not like that. They laugh rather nervously at my suggestion, but we know exactly where they stand. The idea that companies should make a profit—heaven forbid—is anathema to them. This is a party whose shadow Chancellor is, I believe, listed in “Who’s Who” as wanting to overthrow the capitalist system. He is an out and out Marxist. We can laugh at these things, but they are on the record, and it is actually very serious.

The insurance company is a success story. It does make profits, but we have to recognise and be very honest about the fact that whiplash claims are, in many instances, fraudulent. People in this House have described how they have been cold called. I have been sent countless emails asking me to claim compensation for accidents that I did not even know I was involved in and I think many other people have similar experiences. This is a timely piece of legislation. I am delighted that, after many years, we will tackle this issue.

I just want to touch briefly on the discount rate. I remember when it was reduced a little more than a year ago—I think it was in February last year—that there was huge concern about the very low rate. I believe that it was a negative rate. That was not remotely sustainable and I am delighted that the Government’s legislation is trying to put the discount rate issue on a more sustainable and rational basis. There is little to disagree with in the Bill. It is a good piece of legislation and I am very happy to support it on Second Reading.

[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.