UK unveils Ogden, whiplash reform

The UK’s ministry of justice is introducing a bill to reduce the number of whiplash claims as well as changes to the Ogden personal injury discount rate.

Premiums for all types of motor insurance in the UK increased dramatically in the final quarter of 2017, according to the latest Insurance Price Index from the British Insurance Brokers’ Association (BIBA).

The cost of motor insurance has been affected by several factors, including a scourge of fraudulent whiplash claims that led to increased costs to the insurance industry. In addition, in March 2017, the government announced a change to the discount rate used to calculate compensation amounts for catastrophic injuries which meant that claims figures needed to be increased which was reflected in the cost of motor insurance.

The new legislation now being introduced sets in law measures which will reduce the “unacceptably” high number of whiplash claims and allow insurers to cut premiums, the ministry of justice said.

“The number of whiplash claims has been too high for too long, and is symptomatic of a wider compensation culture,” justice secretary David Gauke commented. “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,” Gauke added.

The measures will set fixed amounts of compensation for whiplash claims; and ban the practice of seeking or offering to settle whiplash claims without medical evidence.

Meanwhile, the proposed changes to the way the Ogden personal injury discount rate for serious injuries is calculated aims at putting claimants in the same financial position they would have been in had they not been injured.

In February 2017, the discount rate was reduced from 2.5 percent to minus 0.75 percent, dramatically increasing the size of awards of damages to individuals.

The changes to the discount rate now being introduced through the Civil Liability Bill will set the rate with reference to ‘low risk’ rather than ‘very low risk’ investments as at present, and establish a regular review of the rate, the first within 90 days of the legislation coming into force and at least every three years thereafter. The bill will also establish an independent expert panel chaired by the government actuary to advise the Lord Chancellor on the setting of the rate.

Amanda Blanc, CEO, AXA UK and Ireland, said: "The government’s announcement today on the discount rate strikes the right balance between under and over compensation. Fairness and transparency for personal injury compensation is something that everyone can agree on – it is only right that it works in everyone’s best interests. This sense of fairness is also seen in the government’s commitment to stand by honest motorists in introducing whiplash reforms. These reforms will drive the worst behaviour out of the market, protect honest motorists, reduce the cost of insurance and we of course commit to passing on any savings to every motor customer.”

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