Prisons and Courts Bill

Written evidence submitted by Zurich Insurance (PCB 16)

Prisons and Courts Bill Public Bill Committee

About Zurich Insurance

Zurich provides a suite of general insurance and life insurance products to retail and corporate customers.

We supply personal, commercial and public sector insurance through a number of distribution channels, and offer a range of protection, pensions and investment policies available through financial intermediaries for the retail market and via employee benefit consultants for the corporate market.

Based at around 20 locations across the UK - with large sites in Birmingham, Cheltenham, Farnborough, Glasgow, London, Swindon and Whiteley - Zurich employs approximately 6,000 people in the UK.

Executive Summary

Fraudulent whiplash claims represent a significant problem and we are increasingly worried that whiplash has become seen as the ‘fraud of choice’ for many. Zurich is committed to reducing dishonest and fraudulent whiplash claims to protect honest customers who end up covering the cost through their motor insurance premiums. Indeed, insurers want to provide redress where genuine accident and injury has occurred and not focus on the large numbers of minor and speculative claims. Zurich therefore welcomes the opportunity to provide comments to the Prisons and Courts Bill Public Bill Committee and highlight the following:

· The reforms to whiplash claims and the Small Claims Track (SCT) are a positive move and a welcome step in tackling fraudulent whiplash claims . They will help combat the growing number of fraudulent and exaggerated claims whilst still maintaining access to justice for genuine claimants. They bring a level of certainty to claimants around the compensation they will receive, and remove some of the unnecessary frictional costs from the system.

· However, the definition of whiplash currently provided is insufficient and fails to capture all relevant soft tissue injury claims. The definition of whiplash injury in the Bill should be extended to include lower back injuries and align more closely to the definition adopted by Med Co Registration Solutions (MedCo) which defines a soft tissue injury claim as a "claim brought by an occupant of a motor vehicle where the significant physical injury caused is a soft tissue injury and includes claims where there is a minor psychological injury secondary in significance to the physical injury".. Our MI shows that using the current definition contained in the Bill, only 35% of cases would be included compared to the Med Co definition

· We are concerned that if the Government fails to amend the definition, this could leader to greater incentives to displace whiplash claims into more profitable areas so as to escape from the tariff of fixed costs.

· We welcome the Government’s decision to increase the RTA small claims track to £5,000. It is imperative that this level be subject to an inflationary or ratcheting mechanism at regular intervals. However the increase to £2000 for casualty claims would, in our view, have minimal effect as the average portal damages for EL based on portal data is £4071 and PL £3943.

· We firmly believe that claimants should get the level of payment to which they are entitled following an injury. Unfortunately, the increase in the Discount Rate, coupled with three successive rises in Insurance Premium Tax (IPT), means that increased costs will ultimately be borne by insurance customers. The Prisons and Courts Bill is therefore a timely opportunity to underpin legislation to create a fairer framework for setting the Discount Rate which is fair for claimants, tax payers and premium-payers.

Defining "Whiplash Injury"

1.1 We firmly believe that the current definition of whiplash contained within the Bill is insufficient. Clause 61 of the Bill defines "whiplash injury" as an injury, or set of injuries, of the neck or the neck and upper torso:

"In this Part [Part 5] "whiplash injury" means an injury, or set of injuries, of the neck or the neck and upper torso that is of a description specified in regulations made by the Lord Chancellor."

1.2 Worryingly, this excludes injuries affecting the lower back or shoulders which is very often a common feature of soft tissue injury claims. It is essential that any definition is robust to avoid incentivising the displacement of whiplash claims into more profitable areas. This unintended consequence will encourage bad behaviours, increase costs and prevent insurers from realising the savings required to reduce premium.

1.3 This is fundamental to the proposals having a financial impact. The proposed definition would result in only 35% of cases being captured in tariff damages, the majority of cases would continue to benefit from the current system.

1.4 The MedCo definition of a soft tissue injury claim, which is contained within the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents, means "a claim brought by an occupant of a motor vehicle where the significant physical injury caused is a soft tissue injury and includes claims where there is a minor psychological injury secondary in significance to the physical injury". We would emphasise that this definition is more than adequate. Indeed, MedCo is an independent, Government backed organisation with insurers, medics and claimant lawyers represented on its board and the definition was agreed between all parties.

1.4 Moreover, it is important to recognise that the nature of whiplash is that there may be minimal residual complaints including minor psychological ones. It is appropriate therefore that the definition contained within the Bill includes "minor psychological injury". This prevents the emphasis of medical reports being changed to focus on the psychological injury as the primary element and avoiding the definition of a claim subject to the tariff.

Damages for Whiplash Injuries

2.1 We welcome the Government’s decision to increase the RTA small claims track (SCT) to £5,000. However, it is imperative that this level be subject to an inflationary or ratcheting mechanism at regular intervals. This could, for example, be linked to increases in Judicial College Guidelines. Without this mechanism, the SCT would soon become irrelevant – this detail is crucial to maintaining the success of the increase to the SCT.

2.2 The proposal to increase the small track limit to £2000 for the remainder of claims would have no impact in view of the level of damages that we have already highlighted for EL and PL claims (average portal damages for EL based on portal data is £4071 and PL £3943). It could, however, result in increased costs with claimant solicitors incentivised to breach this threshold for minor injuries to obtain costs similar to that seen with the current £1000 limit

Settlement of Claims without Medical Evidence

3.1 Zurich welcomes the Government’s proposals to ban the settlement of claims without medical evidence in all minor RTA soft tissue injury claims. The use of pre-medical offers has arisen largely due to the fact that the medical evidence has been of very little evidential value in a claim for soft tissue injury. The claimant sees the expert at a point when they are fully recovered and all that the expert can do is to report the symptoms, as relayed to them, to the claimant. In these circumstances the medical evidence does nothing but delay settlement and add cost to the process. Moreover, with a ‘prognosis’ approach for assessing injury duration the claimant will not have fully recovered.

3.2 We acknowledge that it may not be appropriate to ban pre-medical offers in all personal injury claims. Indeed, the problems that we see with minor RTA whiplash do not exist in EL and PL claims, and a total ban would be too much of a blunt instrument if applied across the board. There are many instances where pre-medical offers are used with great success – photographs, for example, are an excellent way to determine severity and therefore quantum on a scarring injury claim.

3.3 We do, however, understand the concerns that are put forward in respect of pre-medical offers when made to unrepresented claimants. Therefore, we would suggest that the offer and acceptance of pre-medical offers in EL and PL claims should be permitted where the claimant is properly represented.

Personal Injury Discount Rate

4.1 The Lord Chancellor’s decision to change the Personal Injury Discount Rate from 2.5% to a negative rate of -0.75% applied to catastrophic personal injury compensation claims has had a profound and significant impact on the costs of insurance and the public purse.

4.2 We firmly believe that claimants should get the level of payment to which they are entitled following an injury. Unfortunately, the change in the Discount Rate, coupled with three successive rises in Insurance Premium Tax (IPT), means that increased costs will ultimately be borne by consumers.

4.3 Urgent measures are therefore needed to create a fairer framework for setting the Discount rate. Whilst this is not currently addressed in the Bill we firmly believe that the Prison and Courts Bill represents a useful, and indeed timely, opportunity to underpin legislation to create a fairer framework for setting the Discount Rate which is fair for claimants, tax payers and premium payers.

4.4 We welcome the publication of the Government’s consultation into the Discount Rate and the review of the framework under which the rate is set. We hope that this process is concluded swiftly to ensure that appropriate measures can be introduced to the Prisons and Courts Bill.

April 2017

 

Prepared 18th April 2017