Government whiplash crackdown could drive down insurance premiums
The Ministry of Justice has launched a consultation on proposals that could cut insurance premiums for motorists.
The consultation paper outlines plans to scrap the right to compensation or put a cap on the amount people can claim for minor whiplash injuries, which would see the average pay-out cut from £1,850 to a maximum amount of £425. Compensation would only be paid out if a medical report was provided as proof of injury.
Other measures include:
- Introducing a transparent tariff system of compensation payments for claims with more significant injuries
- Raising the limit for cases in the small claims court for all personal injury claims from £1,000 to £5,000
- Banning offers to settle claims without medical evidence. All claims would need a report from a MedCo accredited medical expert before any pay out.
Insurers have pledged to pass on savings to drivers – worth a total of £1 billion – which would cut premiums by around £40 a driver.
According to the Government, whiplash claims are 50% higher than a decade ago, “fuelled by a predatory claims industry that encourages minor, exaggerated and fraudulent claims, driving up the costs of insurance premiums for ordinary motorists”.
Justice Secretary Elizabeth Truss said: “For too long some have exploited a rampant compensation culture and seen whiplash claims an easy payday, driving up costs for millions of law-abiding motorists.
“These reforms will crack down on minor, exaggerated and fraudulent claims. Insurers have promised to put the cash saved back in the pockets of the country’s drivers.”
In response, James Dalton, director of general insurance policy at the Association of British Insurers (ABI), said: “The insurance industry has campaigned long and hard to tackle the impact of whiplash-related claims on honest motorists, so we welcome these proposals. Introducing a range of measures, such as limiting the compensation payable for these injuries, will help create a more honest system that doesn’t reward those who want to exploit it. If implemented, these reforms will ease some of the pressure recent increases in Insurance Premium Tax and repair costs are already putting on premiums.
“We will need to study proposals carefully and look forward to participating in this consultation, and the debate about how we can ensure fair compensation for genuine claimants and a fairer deal for motorists.”
The RAC also broadly welcomed the announcement. Director of insurance Mark Godfrey commented: “The present system is now widely regarded as broken and in need of reform – in recent years insurers have been inundated by false or inflated claims which are unfairly pushing up premiums for all motorists in the UK. This is in addition to other, unrelated costs which are further increasing the cost of insurance, such as the two recent rises in Insurance Premium Tax.
“There is an important balance to strike here though – while bogus claims must be stamped out, it is crucial that motorists that have genuine claims are not disadvantaged, which is why we now look forward to seeing the finer detail of the Government’s proposals.
“Insurers have pledged to pass on savings brought about by the whiplash claim crackdown announced today – it is imperative that they follow through with this commitment to the benefit of honest motorists.”