My Lords, I beg to move that the Grand Committee do consider the Whiplash Injury Regulations 2021 and the Civil Liability Act 2018 (Financial Conduct Authority) (Whiplash) Regulations 2021.
These draft statutory instruments are key components of the Government’s whiplash reforms. They will simplify the process of settling whiplash claims, provide certainty to claimants as to how much their claim is worth, and benefit society by enabling an average reduction in insurance premiums for ordinary motorists of around £35 per premium. I remind the Grand Committee that the Secondary Legislation Scrutiny Committee has drawn both of these important SIs to the attention of the House.
The House had a number of extensive debates on the merits of the Government’s policy underpinning these SIs during the passage of the Civil Liability Act 2018—which I will refer to as “the Act”—so, with the limited time available to us today, my focus will be on the detail of these regulations rather than on rehearsing past policy debates.
The measures in Part 1 of the Act change the process for making whiplash claims by defining what constitutes a whiplash injury; introduce a fixed tariff of damages for pain, suffering and loss of amenity, or PSLA; provide for an uplift to be applied to the tariff
amount in exceptional circumstances; and ban the practice of seeking or offering to settle a whiplash claim without first seeking appropriate medical evidence. In addition, we are increasing the small claims track limit in respect of road traffic accident-related personal injury claims from £1,000 to £5,000.
We had also previously committed to increasing the small claims limit for all other types of personal injury, including employers’ and public liability claims, to £2,000. However, the Lord Chancellor has confirmed today, through a Written Ministerial Statement, which I have repeated, that the Government have listened to the views of Members of this House and others, and have decided both to limit this increase to £1,500 and to defer its implementation until April 2022. I hope the Committee will agree that this is a sensible and pragmatic decision, which will give stakeholders additional time to prepare.
The Whiplash Injury Regulations set out a tariff for the amount of damages payable for PSLA for a whiplash injury or injuries of up to two years and any minor psychological injury suffered at the same time. They allow the court to apply an uplift of up to 20% to the tariff amount in exceptional circumstances. Regarding the ban on pre-medical report offers to settle, they specify what constitutes appropriate medical evidence and the experts who may provide it. That will differ depending on whether the injuries include a non-whiplash element.
The purpose of the other statutory instrument is to give powers to the Financial Conduct Authority to enable it to monitor and enforce the ban on pre-medical offers to settle.
Let me now provide a little more detail on each regulation, starting with the tariff figures, which present a rising scale of fixed payments determined by injury duration, with damages reduced less at the top end to recognise more serious injuries. Where the prognosis exceeds two years—in serious cases, that is—claims fall outside the tariff.
We have reviewed and updated the previously published figures to account for inflation. We have also added a three-year future-proofing element to ensure that they do not move out of alignment with future inflationary pressures before the required statutory review in three years’ time. That leads to an increase of about 11% over the figures previously provided to the House.
The reason for the uplift of up to 20% in exceptional circumstances is to balance the need for an effective tariff while also providing for judicial discretion. That 20% figure takes into account feedback received during consultation and in earlier debates, and reflects the position in similar jurisdictions such as Italy, which allow for an uplift of up to one-fifth.
During the passage of the Act we introduced, on the advice of the House, amendments to ensure that the views of the Lord Chief Justice were sought, we have undertaken this consultation, and we are grateful for his consideration of these matters. He was clear that the tariff figures
“demonstrate a material divergence in the levels of damages between those proposed and those which are generally currently awarded”.
He also acknowledged that the tariff figures were similar to those previously tabled before Parliament, when the Government’s intent that the tariffs would be lower than the figures in the Judicial College Guidelines was made clear.
The Lord Chief Justice emphasised that the tariff was a
“narrowly defined statutory derogation from the principle of full compensation through an assessment of damages by the courts”,
but considered that it was not appropriate for him to suggest a change. He made it clear that he understood the Government’s principles underpinning the uplift, but expressed the view that he would prefer the judiciary to have greater discretion.
Following receipt of the Lord Chief Justice’s response, further discussions with the legal advisers to the Joint Committee on Statutory Instruments led to a need to amend the tariff figures to distinguish between damages for claims for whiplash injuries alone and damages for claims for whiplash injuries and minor psychological injuries. We made the Lord Chief Justice aware of these re-presented figures and he was clear that his response, in substance, remained the same.
The Lord Chief Justice also considered that it would be beneficial to review the tariffs earlier than the statutory three years. We do not know now whether we will have enough data in a year’s time to make an informed assessment, so I cannot commit to an early review, but we are open to the possibility. We must first make sure there is evidence available to undertake a meaningful review from which effective conclusions can be drawn. Having considered the points made by the Lord Chief Justice, we will not change our position on the tariff amounts or the judicial uplift of 20%, but we will undertake an analysis of the available data after a year with a view to considering whether an early review is appropriate.
Turning to the medical evidence, the regulations provide that in cases where a claimant lives, or is examined, in England or Wales they must obtain a fixed-cost medical report from an accredited medical expert selected via the MedCo portal. If there are other more serious injuries, the expert has to be listed on the General Medical Council’s specialist register.
The other regulations, which relate to the Financial Conduct Authority, give powers to the FCA to enable it to take effective action to monitor and enforce compliance with the ban on seeking or making pre-medical offers to settle. The FCA is the regulator for insurers and claims management companies which may be involved in settling whiplash claims. These regulations therefore ensure that the FCA has the powers it needs to regulate Section 6 of the Act.
I emphasise that the measures in these regulations are necessary and important. They will provide certainty to whiplash claimants, create savings which will be passed on to consumers and enable the FCA effectively to regulate the ban on the offering and seeking of offers to settle whiplash and associated claims without appropriate medical evidence. I hope that on this basis the Committee will be able to support these measures. I therefore commend them to the Committee.