Civil Liability Bill [Lords]

Mike Wood Excerpts

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

[Huw Merriman]

My hon. Friend is right. Britain is the leading country in the European Union when it comes to insurance. The top 10 insurers are based in London, and I celebrate this international market.

Of course, the insurance industry is very critical of the Conservative party for introducing and increasing the insurance premium tax, so any suggestion that this party does everything the insurance industry would like us to do is not backed up by our decisions.

It is undoubtedly the case that our cars are now much safer and that design and technology mean that injuries should not be as prevalent as we are seeing. We have also seen the growth of claims management companies, which have driven and fuelled claims. Sometimes we see such industries moving on from one sector to take advantage of another—holiday insurance is a good example; the claims management companies have already moved into that sphere. Equally, I would like to see more done with technology to address the ability of such companies to contact me and my constituents directly. People register with BT in order not to receive unsolicited calls, yet such calls still come through regularly. I hope that the technology will eventually keep pace and close down such calls.

I have made my points more than once, and I absolutely support the Bill. Although I can see that the Opposition’s intentions are good, if the amendment were accepted, it would drive a coach and horses through the very intention of this Bill, which is to reduce premiums for all our constituents and to make it easier for them to manage and live their lives.

[Mike Wood (Dudley South) (Con)]

Although I originally studied law and was called to the Bar, I never practised, so I hope I may speak in the debate without being tied to any particular interest. This debate is increasingly showing a division between those on the side of personal injury practitioners, and those on the side of the overwhelming majority of our constituents who face the costs arising from an ever-escalating number of claims, of escalating value, for relatively minor injuries. My right hon. Friend the Member for New Forest West (Sir Desmond Swayne) was right to draw the House’s attention to the remarks of the former Lord Chancellor, Jack Straw. If my memory serves correctly, he told The Law Society Gazette that he was in favour of banning compensation for soft tissue injury altogether. Clearly the Bill does not go anywhere near as far as that.

[Kwasi Kwarteng]

So a former Labour Lord Chancellor suggested that he would ban this compensation entirely. What on earth possessed him to suggest that as a policy?

[Mike Wood]

Reading through The Law Society Gazette, I see that Jack Straw’s actual comment was:

“Whiplash is an innovation of fertile legal minds which has no real foundation in medical knowledge. Everybody knows the vast majority of whiplash claims are completely unjustified. I support any measures to eliminate soft-tissue injuries.”

I understand that he was referring to compensation for soft tissue injuries, rather than eliminating the injuries altogether.

Hon. Members have spoken about the apparent paradox when we have the long-term reduction in the number of road traffic accidents, the increasing safety of more of the cars on the road and the long-term reduction in the number of deaths and serious injuries as a result of road traffic accidents, and yet the number of personal injury claims for whiplash and other minor injuries having increased significantly—it has gone up by 30% in 12 years. That enormous statistical increase cannot be dismissed as coincidental.

It has been suggested that the idea of a compensation culture is more about perception than reality, but how many of us have not had regular phone calls inviting us to claim for an accident that we have not had, encouraging us with the idea that a fortune was surely around the corner if only we referred the case to the firm that was ringing us up. I have no problem with solicitors—some of my best friends are solicitors, as they say. Indeed, many years ago my wife worked with one of the country’s leading personal injury solicitors’ firms, mostly doing administration on road traffic accident claims. But we need to look at the state we are now in. All the empirical evidence suggests that the initial intentions behind addressing no-win, no-fee claims for personal injuries have generated a spiralling increase in claims that are not the result of pecuniary loss—they are about not loss of earnings or quantifiable losses, but a figure being placed on pain, suffering and loss of amenity.

Previous studies have suggested that, contrary to what others have been saying, the amounts awarded by courts in England and Wales are significantly higher than those awarded in most other European jurisdictions for personal injury claims. When there is a serious injury, especially if the effects are permanent or long-lasting, or even if it results in disability, clearly no one disputes that it is right that there is compensation, especially for the loss of opportunity and amenity caused by that injury. However, shorter-term soft-tissue injuries do not really fall within that category. That is why it is proportionate for the Bill to introduce a tariff that sets out the amounts payable for certain categories of minor, non-permanent injuries.

[Bambos Charalambous]

Is the hon. Gentleman aware that, under the criminal injuries compensation scheme—one of the Government’s own schemes—a person can get £1,000 for a criminal injury of whiplash? Under these tariffs, however, someone would get £470 for the same injury, except it would not have been the result of a criminal event.

[Mike Wood]

I understand the hon. Gentleman’s point, but there is clearly a distinction between being the victim of crime and being involved in an accident, even a road traffic accident.

[Rory Stewart]

rose—

[Mike Wood]

Of course I give way to the Minister.

[Rory Stewart]

Does my hon. Friend agree that these discrepancies already exist, because the criminal injuries compensation scheme is, in fact, already an example of a tariff-based system? As those discrepancies have existed since 1962, nothing in the Bill changes their basic nature.

[Mike Wood]

The Minister, as ever, speaks straight to the point that bringing this system in line with the criminal injuries compensation scheme is actually making parallel systems more consistent, and it is entirely logical that they should operate on similar tariff-based systems. One of the flaws in the current system is that, as the Judicial College is setting its guidelines, the awards it uses for deciding the amounts in the guidelines are not the overall amounts that are payable in the event of a road traffic accident leading to personal injury, but are based on the awards made by the court in the relatively small proportion of claims that proceed to trial and are then adjudicated by a judge. The system does not consider the very large number of claims that are settled at an earlier date when the figure would tend to be lower.

Clearly, cases that proceed to full trial are more likely to be the more complex ones. This has the effect of institutionalising an inflationary element within the guidelines as they are reviewed, because the review is only ever based on those types of claim that actually end up being the higher awards anyway. It can only ever lead to an increasing amount. The impact of that falls clearly on our constituents. We rightly insist on mandatory motor insurance. As hon. Members have said, motor insurance premiums increase rapidly. One reason why they increase rapidly is that there has recently been a large increase in the average amounts paid out for personal injury claims. If we fail to take this sensible action, those amounts can only increase, and we can expect premiums to continue to increase at around 10% annually, quickly putting them out of reach.

[Kwasi Kwarteng]

I am delighted that my hon. Friend is making this point. What is his view on whether the Lord Chancellor should be setting the tariff? Does that not bolster what my hon. Friend suggests—that there is a role for the Government in trying to keep insurance premium costs low?

[Mike Wood]

Absolutely. Although I tend to argue for a slightly slimmer role for the Government, I do think that there is a place for them in this regard. When we insist on mandatory motor insurance, there is a clear role for the Government in ensuring that pressures on the price of that mandatory insurance are kept under control as much as possible. Having the Lord Chancellor’s oversight of the tariffs is one way in which we can ensure that the people who are already struggling with the escalating costs of motor insurance do not see them taken even further out of reach.

There is a clear risk of a serious moral hazard when it comes to escalating motor insurance. The more that premiums increase, the greater the risk—the greater the temptation, we might say—for some people to take the chance illegally to fail to take out motor insurance and to drive on our roads uninsured, with everything that that implies for safety and for coverage of third parties. Given the current high levels of motor insurance premiums, research suggests that around a quarter of 18 to 24-year-olds have been tempted to try to make savings by not taking out or not renewing their motor insurance policy—driving without insurance. Surely that number can only increase if the cost of motor insurance becomes ever more expensive and increases by far more than inflation or incomes.

As the real cost of motor insurance spirals, more people will be tempted to take the risk of driving without insurance, and young people are more vulnerable to this by far because their premiums are already so much higher. Such behaviour puts other people’s safety at risk and leaves them in an even more difficult situation in the event that they need to make a claim. The number of claims against uninsured drivers increased significantly last year.

The measures in the Bill are designed to keep insurance premiums under control, which is essential if we are to have a functioning motor insurance system. That is why I am not able to support the amendment, why I shall be supporting the Bill, and why I believe that the tariff system for minor injuries is absolutely necessary and must be retained in this legislation.

[Alex Chalk]

It is a pleasure to follow my hon. Friend the Member for Dudley South (Mike Wood).

Whether we sit on the Government Benches or the Opposition Benches, the first thing that hon. Members have to recognise is that we do have a problem in this country; of that there can be no doubt. Other hon. Members have mentioned the statistics, but they bear repeating. In 2005-2006, there were 460,000 or so road traffic accident-related personal injury claims. Just a decade later, that number had soared by 40-odd per cent. to 650,000. There must be concern that the circumstances exist in our country to create an unnecessarily fertile ground for spurious and unfounded claims. What are those circumstances? They include the fact that instead of challenging whether a whiplash claim is dishonest or otherwise unfounded, insurers will take a commercial decision to pay out, because that will be in their interest. As other Members have indicated, the effect of that is that ordinary people living on modest incomes are finding themselves having to pay more for their car insurance than would otherwise be the case.

It is a great mistake to say, as some do, that a car is a luxury—to say, “You don’t need your car; alternative transport methods should be satisfactory.” For plenty of my constituents, that simply is not the case. We currently have a big issue in Cheltenham with the closure of Boots Corner, a key arterial route through the town. One argument made by those who favour closing off the road is that people can get around on bikes. That might be okay for some people, but for plenty of my constituents—including nurses, people ferrying around their children, and people with disabilities—it is not. We have a duty in this House, wherever we stand, to drive down the costs of living for hard-working people and their families.

We have to be clear on what the legislation is not about. A lot of the points made by Opposition Members are motivated by the best of intentions. I have served on the Justice Committee with several Opposition Members, and they have shown great distinction—if I may be so bold—and argued vigorously and passionately for the principle of access to justice and on employment tribunal fees, to which the hon. Member for Lewisham West and Penge (Ellie Reeves) referred. But that is not what this legislation is about. It is important not to set up straw men to knock down. Were this debate about LASPO, access to justice and ensuring that people could get early legal advice and assistance, I would have an awful lot more sympathy, but in fact is far more restricted, calibrated and proportionate.

First, this debate and the provisions in the Bill are not about people who sustain whiplash injuries and whose pain, suffering and loss of amenity last beyond two years. If they do last for longer than two years, the case of course falls outwith the tariff system. Secondly, this debate is not about special damages. Let us consider a run-of-the-mill case in which somebody is involved in an accident, makes a whiplash claim because they have a sore neck, spends time off work and incurs taxi fees going to and from the doctor and various other fees. Such special damages would not be subject to any kind of tariff and could be claimed in the normal way. In other words, if someone was off work for, say, nine months, the mere fact that their general damages for pain, suffering and loss of amenity had been capped would not in any way preclude them from seeking the full extent of their special damages. That is why it is important to draw a distinction.