The government has confirmed that it will check whether insurance companies pass on to consumers the savings they make as a result of personal injury reforms. In a statement to the House of Lords, justice minister Lord Keen of Elie said insurers should be ‘accountable’ for their commitments to pass on savings.
Until now the government has suggested that it would rely on market forces to regulate prices and ensure consumers feel the benefit of the fall in the cost of claims expected under the Civil Liability Bill’s provisions.
This commitment is a change in position, with the MoJ now promising to bring forward an amendment as soon as possible in the House of Commons that holds insurers to greater scrutiny. ‘Insurers should be accountable for meeting their commitments to pass on savings from the reforms,’ said Keen. ‘Therefore, we have also committed to developing an effective means for reporting on the savings made by the insurance sector being passed on to consumers, making sure that insurers are held to account.’
The government’s impact assessment for the bill shows insurance firms can expect overall total benefits of around £1.3bn a year through reduced claims numbers and smaller payouts. Around 85% of these benefits are forecast to be passed on to policy holders, giving insurers a net windfall of £190m a year.
Insurance premium cuts have been a key selling point for the reforms, but also a point of contention for opponents. Potential savings on annual car insurance are estimated at between £35 and £50, although claimant lobbyists say the figure is nearer £16.
The Civil Liability Bill, which has its first reading in the House of Commons next week, would effectively remove lawyers from low-value RTA claims. A tariff of significantly reduced damages payments has been drawn up, to coincide with the small claims limit rising to £5,000 for these cases. Changes are expected to come into force by next April.
The bill also introduces a new method for working out the discount rate applying to personal injury damages, with regular reviews by the lord chancellor.
Keen also revealed that the government is working with the judiciary to see what further provisions can be made for periodical payment orders (PPOs), which are regular payments rather than lump sums. The Civil Justice Council will review the law and practice regardings PPOs later this year, with a report due by next summer.