Stewart: Fundamental disagreement about the nature of markets
The government stood firm against Labour efforts to amend the Civil Liability Bill yesterday, although indicated that it might move on cases involving children.
The first day of the bill’s committee stage saw the Conservative majority on the committee vote en bloc against 23 Labour amendments, mainly on whiplash reform but also the discount rate.
Justice minister Rory Stewart spoke for the government, with shadow minister Gloria De Piero making Labour’s case.
Last week, the government announced during the second reading of the bill that vulnerable road users would be exempt from the bill and the small claims limit rise.
Mr Stewart defined who would be caught by this as “anybody who is neither driving a motor vehicle nor a passenger in one; in other words, the definition includes pedestrians, horse riders, motorcyclists or anyone else on the road who is not in a motor vehicle”.
He rejected Ms De Piero’s argument that those who suffer a whiplash injury during the course of their employment should also be exempt.
“We would respectfully argue that the key point is that the injury has occurred and not why the individual is in the car,” he said.
“The question of why they are in the car would be a distinction without a difference.”
On child hearings, Labour’s Bambos Charalambous said: “Does the minister accept that there has to be a hearing to settle children’s claims, and that infant settlements require representation? Children often sue their parents if there has been a road traffic accident that is no fault of their own.
“Will he consider exempting them from the scope of the bill? They require solicitors, because there has to be a hearing for there to be a settlement.”
Mr Stewart replied: “Perhaps we can return to that very interesting point on report. It has not been raised in any of the amendments tabled so far, but I would be very interested to see an amendment tabled and to discuss the matter outside this committee.”
Calls for the definition of whiplash to be set by the chief medical officer rather than the Lord Chancellor were dismissed, because this was not simply a medical issue, Mr Stewart said.
“Clause 2 also allows for a review of the definition by the chief medical officer, along with others, every three years to make sure it remains in touch with medical science and medical expertise.
“The definition is in the bill and not purely provided by medical experts because, as the House of Lords argued, this is a medico-legal definition. In other words, it is not simply a question for medical specialists; it relates to the operation of law and the way in which the law of tort would operate.”
There were lengthy discussions about the introduction of the compensation tariff for ‘minor’ whiplash injuries lasting up to two years.
Mr Stewart stressed that this definition of a minor injury came from the Judicial College guidelines.
“We feel strongly that it is important for the bill to remain consistent with the definitions within the Judicial College guidelines. In the absence of that, there would be the first problem of imposing a very unfair pressure, which could inflate, on GPs to push through the one-year barrier, but there is a more fundamental problem.
“Were we to accept the amendments, they would not only take about 11% of cases out, but mean that the provisions on the requirement for a pre-medical offer would then be removed for the one to two-year period. We would suddenly end up with people able to proceed without medical reports for the one to two-year period, which would undermine a lot of the purpose of the bill.”
The minister countered concerns about the impact on low-earners of a lengthy period of work by pointing out that the legislation related purely to general damages, not specials.
He was also pressed on the low levels of proven fraud in whiplash cases. Having argued about the difficulty of doctors diagnosing it, Mr Stewart continued: “The statistics suggest very strongly that what happened to an individual in a motor car in 2005 would, on average, have been much more severe than what happens to an individual in a motor car in 2018.
“A 30% reduction in the number of road traffic accidents, combined with the improvement in safety procedures, would suggest that an individual having a motor vehicle accident today would be considerably less likely to suffer whiplash than would have been the case in 2005.
“Therefore, the fact that the number of claims has increased by 40% is a very peculiar anomaly that requires explanation, which nobody has produced so far.”
In 2016, he said, there were 7,572 confirmed fraudulent motor claims and 58,576 suspected claims.
But he said his point went much wider: “Because of the asymmetry of information and because it is impossible to prove whether the injury has occurred – particularly at the three to six-month period – it is impossible to put a precise number on it.
“We can be confident, through the soaring inflation in the number of these claims, that many are exaggerated, to put it mildly, even though we cannot prove the exact number beyond the 66,147 that are actually fraudulent.”
He went on to argue that the new system meant there would be little incentive to make an exaggerated or fraudulent claim.
The parties clashed over the government’s proposal that a report on whether insurers have passed on the savings from the bill would only need to be published between 1 April 2024 and 31 March 2025, covering the first three years of the reforms – which Mr Stewart said reflected the period in which a claim could be brought after implementation in April 2020.
Labour wanted a report after the first year of the reforms. Ms De Piero said: “Embarrassed by the lack of hard evidence for a commitment, the government have tabled this new clause, which is riddled with get-outs and opportunities for insurers to worm their way out of the flimsy commitments they have made.
“We know – and if the government are honest, so do they – that insurers will seek to avoid paying the savings that they make back to policy holders. That is what happened when they last made promises in 2012. Given the weakness of the new clause, that is what will happen again.”
Labour’s David Hanson, a member of the justice select committee, pointed out that the committee had also called for a report within 12 months.
But Mr Stewart said at its heart this was a “fundamental disagreement about the nature of markets, which will be difficult to resolve simply through legislation”.
He explained: “Again and again, all the arguments… rest on the fundamental assumption that every company, insurance or otherwise, in the country is simply involved in trying to charge their consumers as much as possible and provide as few services as possible, and that there is nothing to prevent their doing that.
“Of course, what prevents companies from doing that ought to be competition… Recent evidence on the cost of motor premiums shows that, after the implementation of the last set of reforms, there was a flattening off in the increase in the insurance premiums that was lower than inflation.”
He said that, if the report showed that insurers have “significantly increased their revenues without passing on savings to customers”, insurers would be taking a “considerable legal risk”, which he indicated may be that it would be evidence of some kind of cartel.
Equally, “pushing for one-year rather than three-year reviews and attempting to price fix the result would leave the opposition amendments open to judicial review and create an enormous, unnecessary burden on the market”.
Mr Stewart cleared up concern that the failure to mention MedCo in the bill as the source of medical evidence could open the door to less scrupulous evidence.
“I can reassure them that the intention is for MedCo to be the appropriate channel through which advice is sought,” he said.
“The only reason we have not put MedCo on the face of the bill is to provide for the eventuality that, in 20 or 30 years’ time, an entity other than Medico might exist.”
Other failed amendments included an attempt to put on the face of the bill a limit on increases to the small claims limit.
Labour has indicated that it will pursue its amendments before the whole House of Commons at the report and third reading stages.
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