My Lords, like the noble Lord, Lord McNally, perhaps I may begin at the beginning. Notwithstanding some rather disobliging remarks from the Delegated Powers and Regulatory Reform Committee referred to at some length by the noble Lords, Lord Beecham and Lord Sharkey, which no doubt we shall discuss in Committee, I welcome the Bill because it has at its heart the objective of achieving the greatest possible fairness. There will be fairness on the one hand to ensure that those who suffer life-changing injuries, often through no fault of their own, are properly compensated in so far as money can ever compensate for life-changing events of that sort. There will also be fairness to the other participants in the insured class who will inevitably have to face commensurately increased insurance costs. They are entitled to reassurance that overcompensation will not take place.
Sadly, as other noble Lords have referred to, there is a darker side to all this as part of a litigious society in the form of making claims on the basis of no or fabricated evidence. The proposals in Part 1 to bring whiplash claims under control therefore seem very worthy of support. In his opening remarks, my noble and learned friend referred to some of these fabricated cases, and perhaps I may pass on to him and to the House the following example. Last Friday, I was in the north of England to attend a board meeting of a company of which I am the chairman. I took a taxi and, as is my wont, I inquired of the temperature of the taxi driver, political and otherwise. We got on to
the issue of whiplash injuries. He told me that it was prevalent in this and other towns in the north of England for young men to buy a clapped-out banger of a car or van for around £200 and engineer a crash with a taxi. I asked why they would choose a taxi. The driver said that there were two reasons. First, they know that a taxi will be well insured. If it was not, it would not be licensed by the local authority. Secondly, taxi drivers depend on the good will of the local authority for the renewal of their licences and so are less likely to put up a fight, argue the case and press for compensation. That is my contribution of anecdotal evidence gathered last week in the north of England, and it is why I think the Bill is an important first step towards reining in the compensation culture.
I say that it is a first step because there are other areas which need attention. No doubt noble Lords will have received briefings from the Association of British Travel Agents about burgeoning claims for compensation for illness occurring on holiday. Moreover, one of the most depressing aspects of the reviews I have carried out of the charity sector is the way in which individuals attending a charitable event, such as a proposal to raise funds for some much-needed community project, seem quite ruthless in bringing claims against a charity. Falling over a guy rope for a tent is a very common claim, as if tents do not have guy ropes and you have no responsibility for looking where you are walking. Charities are often run by volunteers who have only limited access to legal advice. Faced with what they consider an unreasonable claim, they can only use the small claims court for personal injury claims up to £1,000. I understand that this is to be raised to £2,000. However, the £1,000 for road traffic accidents is to be raised to £5,000. I hope that my noble and learned friend the Minister will explain at some point why we are moving from £1,000 to £2,000 and £1,000 to £5,000. That would be extremely helpful, particularly for smaller charities that have to deal with these unfortunate incidents.
Turning to Part 2 of the Bill, I have taken an interest for some time in what is familiarly called the Ogden rate, including initiating a debate on the matter last July, to which my noble and learned friend on the Front Bench replied. I support the overall shape of the proposal. I note the experienced comments of the noble and learned Lord, Lord Hope of Craighead, about risk. We may be able to have some existential discussions about the nature of this in Committee.
I want to raise two issues that I hope we can explore. First, reverting to the underlying strategic aim of achieving fairness, it seems that with long-tail insurance cases, the use of lump sum damages can result in only one near certainty: that the award will be unfair to one party or another. Surely we need to do more in such cases to make better use of periodical payment orders. One of the answers to the question raised by the noble and learned Lord, Lord Hope of Craighead, on making sure that people were fairly compensated would be to make greater use of PPOs.
I am concerned that injured parties—who may or may not be financially sophisticated—may be seduced by an apparent amazingly large lump sum against which the PPO may seem fairly modest and, in reaching
that conclusion, may think that they should accept a lump sum. There is a risk that the injured party may be egged on by investment managers who see a long stream of advisory fees stretching into the future, and by insurance companies who see a chance to put a pink ribbon round the file and close the claim for ever.
My second concern is the proposal for the timing of reviews, a process that—as pointed out by the noble Lord, Lord Sharkey, in his opening remarks—needs to be designed to minimise the possibility of the system being gamed. I share the view that three years is too short a period. Indeed, any fixed-term review period is a very blunt instrument. I would argue that the trigger for a review should not be time-based but result from changes in the available rate of return on our investment. Establishing such a benchmark could be problematic, though changes in the base rate would be a pretty good indicator given that these investments will be low-risk, even under the new regime. Perhaps thought might be given to extending the duties of the expert panel proposed in the Bill to include a power for it to recommend to the Lord Chancellor that the rate ought to be reviewed. I look forward to discussing this matter and others in Committee.
Finally, there is an often expressed concern—indeed, it has been expressed this afternoon—that these proposals to control the costs of claims will result not in reduced premiums for the insured but merely in increased profits for insurance companies. Those of us who have spoken up for a fairer system expect the industry to demonstrate that savings as a result of these measures are being appropriately passed on. To be candid, it will not be good enough for the industry to say something along the lines of, “It’s a very competitive industry so savings are bound to be passed on”. The public are in a cynical mood, as reflected in an article in last Saturday’s Times entitled “Insurers fail to drive down premiums”. The article quotes Mr Matt Oliver from GoCompare as saying:
“Where insurance is concerned, loyalty doesn’t pay. Companies typically use their best deals to attract new customers, so often the only option for existing customers is to go elsewhere”.
If that situation persists, it would be a sad outcome to the Bill, the purpose of which I strongly support.
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