Claimant lawyers had their worst fears confirmed today as the government proposed to press on with raising the small claims limit.
In a long-awaited response to last year’s autumn statement, the Ministry of Justice said it wanted to raise the limit in the small claims court for all personal injury claims from £1,000 to £5,000.
The government's position on the other element of George Osborne’s proposals, a ban on general damages for whiplash, appears more ambiguous. Today’s MoJ consultation proposes either scrapping damages or placing a cap of £425 for ‘minor’ whiplash injuries.
Other measures that have been added to Osborne’s ideas include a transparent tariff system of compensation payments for claims with more significant injuries.
In news that will be welcomed by claimant lawyers, the government also proposes banning offers to settle claims without medical evidence, stressing that all claims would need a report from a MedCo-accredited medical expert to receive compensation.
Today’s ministry announcement repeated former chancellor Osborne’s assertion that the proposals will result in car insurance premiums being cut by £40 a year.
It goes on to describe a ‘predatory claims industry’ that encourages minor, exaggerated and fraudulent claims, meaning whiplash claims are 50% higher than 10 years ago despite a fall in the number of accidents.
Justice secretary Elizabeth Truss (pictured) 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.’
The MoJ said leading insurance firms including Aviva and LV= have pledged to pass on 100% of savings to consumers, although there still appears to be no way of enforcing this pledge.
The government’s consultation comes just a month after the Association of British Insurers had feared the reforms were not likely to happen.
Instead, they now appear to be progressing faster than most expected, with the consultation running until 6 January 2017. It is unclear whether any of the changes proposed would require secondary legislation.
The government leans heavily on ABI figures in its reasoning for the reforms, citing the insurance body’s premium index published last month which reported that premiums had risen 9% in the third quarter of 2016 compared to the same period in 2015.
The Treasury appears to be backing the MoJ’s intentions, with economic secretary Simon Kirby adding: ‘One whiplash claim is paid out every 60 seconds and it is unacceptable that responsible motorists have to pick up the tab.
‘We are tackling the incentives which have created this compensation culture so that all drivers can save money on their motor insurance policies.’
Labour has already publicly pledged to oppose both the small claims limit increase and any ban on damages.
Breaking news: MoJ will press on with £5k small claims limit
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