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Changes to legislation good news for drivers


Motorists are set to benefit from lower insurance premiums after the government announced plans to introduce two key pieces of legislation relating to road traffic accidents.


The Ministry of Justice has this week published a new Civil Liability Bill for England and Wales, which addresses the way in which claims for whiplash injuries are settled, as well as how much insurers have to pay out in personal injury cases.

The bill is intended to make it harder for individuals to make fake or frivolous claims for whiplash injuries that are the result of car accidents.

The government says that new measures, which will set fixed amounts of compensation for whiplash claims and outlaw the practice of settling such claims without formal medical evidence, could save the UK’s drivers as much as £35 a year.

Justice secretary David Gauke said: “The number of whiplash claims has been too high for too long and is symptomatic of a wider compensation culture.

“We are putting this right through this important legislation, ensuring whiplash claims are no longer an easy payday and that money can be put back in the pockets of millions of law-abiding motorists.”

"Great news for motorists"

The government’s plans were welcomed by the insurance industry.

Huw Evans, director general of the Association of British Insurers, 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.”

Evans added that the bill would ensure individuals would receive “fair” levels of compensations while reducing “excess costs” in the system.

“In a competitive market, such cost benefits get passed through to customers, as they did after previous reforms in 2012 when average motor premiums fell by £50 over the next two years.”

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Lump-sum calculation set to change

Another change planned by the government is in the way the courts calculate the size of lump-sum compensation payments for injury victims.

The legal system in England and Wales uses a discount rate, commonly referred to as the Ogden rate, to work out how much compensation a victim is entitled to if they opt to take payment as a lump sum rather than in regular instalments.

But in February last year, the rate was adjusted to account for low interest rates and falling investment returns: it was cut dramatically from 2.5% to minus 0.75%.

This meant that insurance companies had to make much higher lump-sum awards than previously, and was met with fierce criticism across the industry – as well as warnings that the change could lead to higher premiums.

This week, however, ministers have indicated that the Civil Liability Bill is likely to ensure that the Ogden rate ends up in positive territory.

Evans added: “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.”

Finally, the nation’s major insurers have pledged to pass on the cost benefits of the new whiplash rules and the higher discount rates to their customers rather than use the reforms to bolster their profits.

In a joint letter published this week by the ABI and signed by providers such as Admiral, Axa, LV=, Tesco and Zurich, the companies said:

 “The signatories today publicly commit to passing on to customers cost benefits arising from government action to tackle the extent of exaggerated low-value personal injury claims and reform to the personal-injury discount rate.”


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