Civil Liability Bill [Lords]

Baroness Winterton of Doncaster Excerpts

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

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. A large number of Members still wish to contribute, so after the next speaker I will introduce a seven-minute time limit.

--- Later in debate ---

[Ruth George]

My intervention is a question to you, asking how you think the claims management company got hold of your details to be able to phone you and your wife about your accident. Do you agree that your details must have been passed on by insurance companies, who then complain about these very claims management companies, because that is the only place they could have got your personal details and the accident information from? That is what we should be cutting down on.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. May I just reiterate that the word “you” should be used to address the Chair? My personal details have not been passed on to anybody.

[Chris Philp]

Thank you, Madam Deputy Speaker. The hon. Member for High Peak (Ruth George) might well be correct in her assumption about where the details came from.

A ban on referral fees was introduced a few years ago, but some insurance companies have sought to circumvent it by using what they euphemistically term “alternative business structures”. This is where an insurance company effectively owns an equity stake in a claims management company or a claimant law firm and extracts value in that way. I know that the Minister is very attentive to these matters, and I suggest to him that we should look at widening that ban on referral fees to include a ban on so-called alternative business structures. We should ban insurance companies from having an equity stake or any other financial interest in claims management companies or in claimant law firms, to make our existing ban on referral fees a little bit more robust. I say that to make the point that not everyone on the Government Benches is batting for the insurance companies.

In terms of public opinion, 58% of the public believe that personal injury lawyers and claims management companies are responsible for creating a compensation culture, and two thirds of the public believe that a compensation culture exists. My hon. Friend the Member for North Warwickshire (Craig Tracey) has described the cost to individual motorists. The cost is being borne by our constituents, many of whom struggle to make ends meet. When 47% of the value of claims is consumed by costs and legal fees, the system is clearly not functioning properly.

I very much welcome the measures in the Bill, particularly the ban on pre-medical examination offers. I was delighted by the Secretary of State’s confirmation that the examinations will be face-to-face examinations. That is an extremely important clarification. As far as I can tell, the only sanction in the Bill against companies making pre-med offers will be a fine levied by the Financial Conduct Authority. I say to the Minister that I hope that those fines will be substantial. The tariff schedule is simple and clear. It is set at about the same level as that of awards made under the current judicial system, so it is not being substantially discounted, but it is simple, transparent and requires less intervention by the judiciary and the justice system, thereby reducing costs. Many European countries, including France, have a similar tariff system. I welcome this simplification and the associated reduction in costs.

The reforms to the personal injury discount rate are long overdue, and I welcome them. If Members are concerned about them, I would just say that periodic payment orders are available to pretty much every claimant if they feel that they would be better served in that way. They would guarantee that every penny due was paid over. I suggest that periodic payment orders are a better mechanism for avoiding the risk of someone being paid a large amount of money on day one and perhaps being given bad financial advice or spending the money on something other than their own care. I suggest that the Government consider making periodic payment orders the default option and that a lump sum award should be made only if a judge decides that there is a good reason not to set up a periodic payment order. I think that PPOs provide better protection for the claimant.

There are one or two important measures that are not in the Bill but are associated with it. I strongly support the increase in the small claims track limit to £5,000 for road traffic accident personal injury claims. The limit for most compensation claims is £10,000, so we might ask why the limit here is only £5,000 when in almost every other sphere it is £10,000. The Government have already made a significant concession by setting the limit at £5,000, rather than at £10,000, as it is for everything else.

I understand that there might be imminent legislation from the Department for Digital, Culture, Media and Sport to introduce a general ban on cold calling in this area. If that is true, it is long overdue and will be very welcome. Claims management companies should not be making these calls at all, and they should be completely prohibited. I have already commented on alternative business structures. I have had personal experience of this; the public are being incited to commit fraud on an industrial scale. There is no reason why the level of claims in the United Kingdom should be so much higher than in other European countries. These are welcome measures, and the sooner they hit the statute book, the better.

--- Later in debate ---

[Rory Stewart]

This is a sincere question. The suggestion made by the hon. Member for Jarrow and a number of others is that the entire profit model of the insurance companies is based on charging big premiums and trying to minimise the number of claims, and that that is how they make money. The suggestion is that the entire Bill is driven by the insurance industry trying to stop anybody making claims. At the same time, perfectly reasonably, you are making the argument that the insurance companies are trying to support claims. How do they—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. Having brought to the attention of the hon. Member for High Peak (Ruth George) that she must not use the word “you”, I hope the Minister will follow suit.

[Ruth George]

Thank you very much, Madam Deputy Speaker. If the Minister has questions about other Members’ contributions, he really should have addressed them to those Members rather than to me.

There are two sides of the coin here. The Government are not combating the claims management companies at all in the Bill. What they are doing, which I absolutely welcome, is making provision for face-to-face medicals. One would hope that that will combat the fraudulent claims that are made for deliberate car crashes, as well as the other examples that have been cited by Conservative Members.

We also need to ban cold calling. If the Government were prepared to look at those two additional measures—banning cold calling and banning information going from insurance companies to claims management companies—they would find that the problem of excess claims was dealt with to a large degree. I hope that they would commit to doing that before looking to take the measures in the Bill, which will impact on innocent victims of road accidents and accidents at work.

I speak as a victim of several road accidents over 20 years spent commuting into Manchester. When people are nose to nose in traffic, they shunt into the back of other people’s cars—it happens. I have suffered whiplash several times, but in the majority of cases it was not serious, however long it lasted. However, the—fortunately—final accident I suffered has had a very serious impact on me and on my life ever since. As a new mother, I was unable to lift my baby from his cot. I was unable to take our puppy for a walk, because he pulled at my neck. When I tried to return to work, I was unable to do my job effectively because I was unable to work at a computer for more than a couple of hours. Every hour of every day since that accident, I have felt its impact.

Whiplash can even lead to trapped nerves in the neck, which I can assure Members is absolutely excruciating and can happen months after the accident itself. Therefore, whiplash injuries affect the same person differently, and they can affect different people very differently. That is why a tariff, especially at the lower levels proposed by the Government in the Bill, are not a fair way to compensate people. At the moment, a judge looks at not just the injury but the level of that injury and the impact on the victim’s life. That is surely what we should be looking for in a proper and fair compensation culture.

I want to look at employers’ liability cases. USDAW, the shop workers’ union, has estimated that there would be a fivefold increase in the number of employers’ liability cases from its members that ended up in the small claims court rather than in the fast-track system. To make a claim for employers’ liability, employees have to prove their employers’ liability, and that is very hard to do. Cases can be extremely complicated, especially when more than one company is involved, as in the case of a delivery driver making a delivery to a company and suffering an accident there. Is it the fault of the company that provided the lorry or the company the driver was delivering to? That is why employers and their insurers contest claims, and legal costs end up being so high because claims are constantly contested.

It is important that employees can take cases against negligent employers. If employers do not have to pay out for insurance claims, they have no incentive to improve the safety of their workers. That is the second and very important role of the insurance industry: to effectively police those who perpetrate accidents and those who do not. Employers who have suffered multiple accidents at their work places or drivers who have been responsible for accidents would rightly have their insurance premiums increased, and that is surely what we want.

The Bill will make it more difficult for the victims of accidents to take a claim against their employers or insurance companies, and it and the Minister will restrict the very proper role of insurance companies in policing the system to make sure that the perpetrator pays.

I hope that the Minister will reconsider the Bill’s measures, look very carefully at alternatives that would not make victims suffer or enable perpetrators to get away with negligence, drop the proposals to increase the small claims limit and to introduce a tariff for whiplash claims and make sure that our insurance industry operates fairly for the good of everyone.