Government to unveil discount rate reform

Insurers have welcomed plans to introduce the Civil Liabilities Bill through the House of Lords today, which comprises both changes to how whiplash claims are paid and how the discount rate is set.

A statement by the government said: “The Bill will reform the law of England and Wales relating to whiplash claims and the way in which the personal injury discount rate is set under the Damages Act 1996.

“The principal changes in respect of the discount rate are that the rate will be set by reference to expected rates of return on a low risk diversified portfolio of investments rather than on very low risk investments as under the present law.

“In setting the rate, the Lord Chancellor will consult an independent expert panel chaired by the Government Actuary, with HM Treasury remaining a statutory consultee.

“The discount rate will be reviewed promptly after the legislation comes into force and, thereafter, at least every three years.”

The government has also proposed changes to the small claims limit for personal injury cases.

Under the proposals, the limit would rise from £1000 to £5000 for motoring claims and to £2000 for non road traffic personal injury claims.

Insurer welcome

ABI director general Huw Evans said: “If passed, these proposals would be great news for motorists.

“People and businesses are paying more for their motor insurance than ever before and we need changes to the law to tackle some of the root causes. Soft tissue injury claims have been rising year on year since 2014 as cold calling claims firms have thrived, driving up the cost of insurance.

“The sensible new framework proposed for the personal injury discount rate would also deliver a system that is fair for customers, claimants and taxpayers. It is now important that Parliament agrees these proposals swiftly so people across England and Wales can start to see the benefits.”

The sentiment was echoed by Axa UK and Ireland CEO Amanda Blanc. She said: “The government’s announcement today on the discount rate strikes the right balance between under and over compensation.

“Fairness and transparency for personal injury compensation is something that everyone can agree on – it is only right that it works in everyone’s best interests.

“This sense of fairness is also seen in the government’s commitment to stand by honest motorists in introducing whiplash reforms. These reforms will drive the worst behaviour out of the market, protect honest motorists, reduce the cost of insurance and we of course commit to passing on any savings to every motor customer.”