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Motor Insurance (Whiplash)

Volume 570: debated on Thursday 7 November 2013

[John Robertson in the Chair]

[Relevant documents: Cost of motor insurance: whiplash, Fourth Report from the Transport Committee, HC 117, and the Government response, Cm 8738.]

It is a pleasure to serve under your chairmanship, Mr Robertson. I am pleased to have the opportunity to debate the Transport Committee’s recent report on whiplash claims. It is the third report that we have produced on the cost of motor insurance since the 2010 election. Our work in the area started because of complaints about rising motor insurance premiums. In April 2012, the average quoted premium reached more than £1,100 and the premiums paid by young men and women were particularly high, at more than £2,000 for men aged between 17 and 24 years old. Although premiums have fallen recently in cost, they remain high, particularly for young drivers.

Many people need to use a car to get to work, to college, to hospital appointments or to visit family and friends. Public transport is not always available for such journeys, particularly outside towns and cities. The high cost of motor insurance can prevent people from owning a car, seriously affecting their work lives, education or social activities. It can also encourage people to drive without insurance or to commit other forms of fraud. The high cost of motor insurance is also a factor in the cost of living squeeze, which affects households across the land. Our reports have shown that there are a number of factors that influence the cost of motor insurance, including the high accident rates for young drivers, organised fraud, the merry-go-round of referral fees, uninsured driving, cold calling and the growth in whiplash claims. We have pursued all those issues, and most of them are being addressed.

We have repeatedly asked the Government to do more to improve the safety of young drivers—in particular, by making the driving test more rigorous or by introducing graduated licensing. It is appalling that 27% of 17 to 19-year-old males are involved in collisions within a year of passing their test. In 2011, 148 young drivers died. I look forward to the Government’s Green Paper on the issue, which is due soon.

The Competition Commission is examining possible anti-competitive practices by insurers on the cost of car hire and car repair, and I will be interested to see its recommendations and the Government’s response in due course.

Does the hon. Lady agree that more could be done in schools? Teaching “The Highway Code” is not a compulsory part of the curriculum and what is taught from school to school is patchy. We could do more to educate young people about the dangers on public highways.

I agree with the right hon. Gentleman. Young people’s attitudes before they are behind the wheel should be addressed as well. That might be done in schools or in after-school clubs.

Another area of concern that we identified, which is within the Minister’s remit, relates to the activities of claims management companies and, in particular, cold calling. We are told that cold calling is illegal, but the problem seems to be growing. We have all received phone calls or text messages urging us to make a claim because of an assumed or real recent accident. What action is being taken to clamp down on cold callers? Have any firms been prosecuted?

In our most recent report, we looked at another factor that explains the rise in the cost of motor insurance: claims for whiplash injuries. A whiplash injury is a soft tissue injury to the neck caused by a sudden, forceful jerk, such as can be caused by a road accident. Symptoms can last for a few weeks or months. In a minority of cases, symptoms can last for longer, especially if exacerbated by a pre-existing condition. There is no generally accepted test for a whiplash injury. They do not show up on X-rays or MRI scans. However, the medical evidence that we received confirmed that the injuries are real and can have debilitating consequences for those who suffer from them. There are about 500,000 motor insurance claims for compensation arising from whiplash injuries each year, although the number is coming down.

The official figures on road safety show a welcome reduction in the number of people killed or seriously injured. In 2012, there were a total of 195,723 casualties in all the road accidents reported to the police, which was 4% lower than in 2011. Some 1,754 people were killed—an 8% decrease from 2011—and 23,039 were seriously injured, down 0.4% from the previous year. Those reductions are welcome, but every individual serious accident is a tragedy for the individual and the family concerned. It is not clear, however, exactly how the number of claims relates to the number of accidents, as the statistics on road traffic accidents are not comprehensive. There is widespread agreement that a significant proportion of the claims are fraudulent or exaggerated, but there is no authoritative data, perhaps because of the very nature of the issue. The Government are right to be looking seriously at the problem.

Does my hon. Friend agree that one of the reasons why the cost of motor insurance has gone up is that insurance companies have irresponsibly paid out claims without any evidence that the person is suffering from whiplash?

I fully agree with my hon. Friend. Indeed, I will shortly refer to that issue.

The Government proposed whiplash claims of up to £5,000, which would cover most of them, should be dealt with in court by using the small claims track. That approach was strongly backed by insurers, but rejected by most solicitors. The Transport Committee opposed that change, because many people who use the small claims track would have to represent themselves, and we thought that that would impair access to justice, especially as insurers would, of course, be legally represented. It was also not clear how expert evidence would be accommodated in the system. I am pleased that the Government accepted those arguments and rejected making that change at present.

We recommended the accreditation of independent medical practitioners to provide medical reports on whiplash claims. There have been claims that reports are of variable quality and that the doctors who issue them are not up to date with current requirements or are sometimes biased towards the claimant. I am pleased that the Government have accepted the recommendation in principle, although they have stated that they will enter into further discussion on implementing it.

We did, however, ask a number of other questions that have not yet been answered. For example, is there a role for existing regulatory bodies, such as the General Medical Council, in auditing or peer reviewing reports or dealing with complaints? Should practitioners who prepare reports be provided with information about the accident and the claimant’s medical record? We have written to the Ministry of Justice about those issues, but I welcome answers today if the Minister can give them.

We were disturbed to find that insurers frequently offer to settle claims before any medical evidence is submitted. My hon. Friend the Member for Blackley and Broughton (Graham Stringer) made that point. It would be hard to imagine a clearer incentive to making a fraudulent claim. The Government have said that they will consider prohibiting the practice. Can the Minister tell us what work is being done on that and whether it requires legislation?

We also recommended that the Government look at ways to make whiplash claimants provide additional information at the time of their claim, such as proof that they saw a medical practitioner shortly after their accident. Will the Minister give us his view on that? Will he also comment on the debate arising from the Summers case about whether the courts can strike out claims where exaggeration is proven, but where there has also been a genuine injury?

Those complex issues have been created by the dysfunctional motor insurance market. It cannot be good practice for insurers to settle whiplash claims without medical evidence. It is unacceptable that ways are still found for insurers, solicitors, doctors, garages, car hire firms and others in this merry-go-round to make money out of claims, often by inflating the work necessary to address them. For years, insurers have found ways to increase the costs paid by their rivals, and the result has been higher premiums for the ordinary motorist.

The hon. Lady’s Committee has produced an excellent report. Will she say something about the limitation period? At the moment, someone who suffers personal injury has three years within which to bring proceedings to a court. Does the hon. Lady agree that there is a strong argument for reducing that limitation period?

I agree. Indeed, the Committee recommended a reduced period, but it appears that the Government response to the consultation and our report rejected that. That is an important point, and I would be interested to hear any comments the Minister can make about it.

I thank the Government for responding to our various reports and for accepting many of our recommendations, but there is more to be done. That includes effective working between a number of different bodies, including the Ministry of Justice, the Department for Transport, the Driver and Vehicle Licensing Agency and the Department of Health, as was agreed in the debate that we held in November 2011. Will the Minister explain what cross-departmental arrangements currently exist?

It is important for recommendations such as those from the Transport Committee to be based on evidence from all the interested parties. It was a mistake for the Government to listen only to the insurers at the summit that they held in February 2012, which excluded the views of those who represent the genuinely injured; indeed, as we pursue the issue of fraudulent claims, we must never forget the rights of genuinely injured people to compensation. The decision not to pursue the small claims track proposal shows that the Government’s summit, with its concentration solely on the insurers, was in fact a misjudgment.

Now that the Government have acted on whiplash, will the insurance companies be held to their promise to reduce motor insurance premiums? How will that be monitored? That promise was made at the summit the Government held at No. 10. When the Transport Committee asked the insurers who appeared before it about that promise, they said it had, indeed, been made. Will it be honoured? How will it be monitored?

We will continue to pay close attention to the cost of motor insurance, and we intend to report again early next year on the action that the Government are taking. Fraud and exaggeration should be minimised, but access to justice for the genuine claimant should not be impeded. Motorists want better-value car insurance and confidence that the system treats them fairly, as well as fair compensation if they are genuinely injured. We want to help that become a reality.

I had not anticipated being on this early—I see faces falling around the room—but it means that I have sufficient time to develop my argument. It is a shame that more Members are not taking part in the debate, because this is an important issue. The report that my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) has just spoken to is important and authoritative, and it has had a significant impact for the good on Government policy.

As I will explain, there was a danger that the Government’s consultation on whiplash would be another stitch-up on behalf of the insurance industry, but what has emerged in their response is far less damaging and, in some ways, positive. I do not know whether the new Minister had a hand in developing it—I would like to think he did—but he brings a breath of fresh air with him. Having dealt with his two predecessors over the past three years, I have, sadly, become used to there being a lack of evidence to support the Government’s conclusions and to a disconnect between their policy and their soundbites, particularly on this issue.

I may be being over-optimistic as far as the Secretary of State, although not the Minister, is concerned. I say that because the Government response to the Select Committee report and the consultation was announced in a peculiar way—it was certainly new to me. The evening before it was announced, there was an embargoed press release, which then featured in the morning papers, before the report itself had been considered. Therefore, the report—rather like this debate—did not get the attention it perhaps deserved.

It is fairly clear why that happened. Suddenly, when he took up his post, the Secretary of State for Transport started talking about MOT prices and motorway fuel prices. The reason for that is that the centrepiece of the Government’s consultation, which they intended to adopt —the increase in the small claims limit from £1,000 to £5,000 for personal injury—had been jettisoned, primarily due to the evidence in the Select Committee’s report, and the Government were left with not very much to say on personal injury and whiplash.

In fact, the only thing the Government were left with to talk about were the medical panels. The medical panels are interesting, and I will come on to them a bit later, but they are hardly revolutionary—they are hardly going to make the major changes to personal injury law or the processing of claims that the Government, with the usual bombast that surrounds the Secretary of State, led us to believe they would. We had a bit of clever pre-spinning on this issue, but the substance, which we will talk about this afternoon, is that the Government simply backed off from a very unwise proposal.

As I said, I have had three years of having to deal with rhetoric that simply is not supported by the facts. “Compensation culture” is one of the buzz phrases the Government have used to mount a wholesale attack on personal injury law, despite the phrase being disowned by their own experts and reviews. It has been a cover for cherry-picking the Jackson reforms and implementing only those parts the insurance industry thought favourable. It has also been used as a cover for extending the portal scheme, which is not a bad scheme in itself, to cover higher amounts and to include public liability and employer liability to a high level. That was before we had really seen whether the scheme was working in relation to road traffic. All those factors have tipped the balance very much in favour of defendant insurers and away from claimant victims.

Whiplash is another catch phrase that has been used substantively to tarnish the reputation of all personal injury claimants, and particularly road traffic personal injury claimants. It was something of a cloak for the belated attempt—now abandoned—to raise the small claims threshold to £5,000. That would have taken at least 90% of personal injury claims on to the small claims track, so they would not have been subject to cost regimes or representation. Many victims, some of whom will have quite substantive injuries—a £5,000 general damages claim in a personal injury case represents quite a severe injury—would therefore be on their own, as litigants in person or as prey to insurers or claims management companies, in trying to settle a claim.

The evidence shows that those who are represented in such claims tend to get awards of about three times what they would have got if they had been unrepresented. The average whiplash claim that is paid out is about £3,000 for represented claimants and about £1,000 for unrepresented claimants. That is a significant difference.

It is clear that there are problems with whiplash. Soft tissue injuries will by definition be more subject to fraud than injuries where damage can be clearly seen and assessed. That fact, with insurance sector spin, becomes the view that all whiplash claims, or a very large number of them, are fraudulent, or even, effectively, that soft tissue injuries do not exist at all. That must be wrong.

I think I saw a figure in the report that estimates of the proportion of claims that were fraudulent ranged from less than 1% to 60%. The insurance industry’s own assessment is that about 7% are fraudulent. That is a significant number of claims, and it should cause us all to pause to think and worry, but let us not forget the 93% of claims that are genuine instances of people in pain and suffering, perhaps unable to work or with additional needs and costs. They are entitled to compensation.

I apologise to my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) for missing the beginning of her speech.

Has the shadow Minister, my hon. Friend the Member for Hammersmith (Mr Slaughter), had a chance to make his own assessment of the accuracy of claims?

It is difficult. There is a lot of rhetoric out there, and I have said what I want to say: that we should be concerned about fraud per se, and, in the context of personal injury actions, about soft tissue injuries, because it is easier to make fraudulent claims on them. The issue is how we deal with that.

I am delighted that the Committee’s report highlighted two issues. One of those is third-party capture, which is an open invitation to fraud. We know why insurance companies use it. They think they can settle a claim quickly and cheaply by offering a sum of money that is probably a fraction of what a genuine injury is worth. Usually because the victim does not know what it is worth, or needs money in a hurry, or perhaps because they do not want to have the case tested in court, they will settle for the sum—perhaps a few hundred pounds or £1,000—offered in an unsolicited phone call from the insurers. That must be wrong. Lawyers and medical experts have been saying that for a long time.

I am glad that the issue has been highlighted, and even more pleased that the Government appear to have accepted it. I hope that the Minister will say a bit more about what action will be taken. I have tabled parliamentary questions, and the Minister has answered some of them, but I do not think that he dealt with that issue, and it would be useful if he would.

The other issue that I was pleased to see highlighted in the report was how often fraud is pleaded by insurers defending claims. The answer is rarely. I cannot give a percentage, but from talking to practitioners—I do not think that this is denied—I understand it is rare to raise the issue of fraud in defence. If that is not being done, it is difficult for insurers to claim that they are aware of fraud.

Fraudulent claims can and should be challenged, and not only for the sake of the individual cases; if that happened more commonly it would, one might think, discourage fraud. What the insurance industry has been looking for, which the Government were going along with until recently, is a quick and dirty solution, which might deal with the problem but would throw out the baby with the bathwater. It would also prevent victims from getting fair compensation and encourage bad practice. It would encourage third-party capture and would also be likely to encourage the intervention of claims management companies.

Right hon. and hon. Members present will probably all be clear about the noxious effect that the claims management industry has had in its expansion in many areas of public life in the past few years. Having been restricted in some areas, it is looking for others to expand into, and it has its eye on the one that we are considering. If the small claims limit had been raised, with the result that claimants could no longer get representation, they would have been easy prey for claims management firms, who would say, “Let us handle it for you. We will take 30% or 50%,” and would purport to negotiate with the insurers on the claimant’s behalf. I hope that resisting the temptation to raise the limit will deal with that.

I have no particular problem with independent medical panels, if they work. However, I do not think that they will make a dramatic difference, and I am not sure that they are the simplest or right solution. Neither am I sure what evidence the Government have about fraudulent and dishonest practice by medical practitioners at the moment. The Minister might want to explain that.

When the panels have been used in other countries—Australia is the obvious example—they have rather become the captives of the insurance industry. I hope that that will not happen here and that they will be genuinely independent. Also, they seem like a bit of a sledgehammer to crack a nut. They will be a great new piece of bureaucracy and I am not sure that we could not have achieved the same objective of being sure we were getting reliable, robust and testing medical reports simply through registers of medical practitioners who were accredited as independent. That would have been cheaper, probably as effective or more effective, and more independent. We shall see where the approach leads.

There has been a progressive erosion of claimants’ rights in personal injury. I do not believe that personal injury claims, on the whole, can be brought by litigants in person. If 90% of claimants had been unable to get representation, it is likely that their claims would have been settled disadvantageously to them.

That is not just my opinion—that was the Government’s opinion last year, three months, I think, after they decided not to proceed with any change to the small claims limit for personal injury claims. They started a new consultation in April. I think it was in February that the previous report found against going ahead. The Government decided to go ahead and raise the limit to £10,000 for non-personal-injury cases, and that is probably right. We can argue about the exact figure, but it was somewhat overdue.

I do not think that, if the Government had decided, to allow for inflation, to raise the personal injury limit to £1,500 or £2,000, anyone would have had much of a quarrel. It is somewhat perverse that, having wanted to raise the limit to £5,000, they have now decided not to increase it at all; after they dismissed the matter in February there cannot really be any explanation for their proposing consultation in April, other than that they wanted to go ahead and have now been dissuaded.

However, it was not just that report: every report in the past 15 years, under the Labour Government as well as the present Government, that has considered small claims limits, as well as independent judicial reviews of the matter, found that it would not be sensible to increase the limit as the Government proposed. I think that, having got everything it wanted through the insurance summit at Downing street and so forth, the insurance industry decided it was on a roll. Having got the Jackson concessions and similar things, it was looking for an opportunity to go further. This was the prize that insurers really wanted, because they thought that it would almost entirely destroy the personal injury lawyers, save for catastrophic and major injuries.

If one looks at other countries to learn lessons, with Australia being the obvious example, one can see that such changes lead to wholesale restrictions on the rights of claimants. In Australia, there is something called whole-person impairment that has quite a high threshold below which no personal claims can be made. In other words, a person has to be substantially injured before they can bring a claim. There is also no-fault compensation, under which the onus is effectively passed to the state rather than being on insurers.

There is a proposal in Australia, not due to come in for another five or six years, simply to ban the common law right to sue for personal injury. I find it perverse that a Conservative Government might start to walk down that track. The losers would be not only the victims, but the state, which will end up picking up the tab through the increased costs of the NHS and benefits, and in other ways. The proposal would effectively nationalise the liability for personal injury.

The winners here are clearly the insurers, whose shareholders and profits are the major driving force. Are motorists winners? So far, there is no evidence that they are. Although the Minister’s predecessors said—it will be interesting to hear whether he repeats this—that insurance premiums will come down as a consequence of the measures, the insurance industry never says that. It says that it hopes that insurance premiums will come down. They have come down, I think, by 12%.

I respectfully suggest that the hon. Gentleman look at what the AA has said—that average insurance premiums for comprehensive cover have gone down.

I think that there is a misunderstanding. No one denies that insurance premiums have been going down. They have been going down for some time, and were doing so before any of the Government’s changes were implemented in April. I refer the Minister to an answer he gave. I asked,

“with reference to his…announcement of 23 October 2013, how much of the 12 per cent reduction in motor insurance premiums over the last year is attributable to the reforms to civil litigation funding and costs brought in April 2013.”

I am afraid that the answer was that it is

“too early to assess the full impact of the reforms”,

but that AA Insurance has ascribed the reduction

“to anticipated savings to the Government’s reforms.”—[Official Report, 6 November 2013; Vol. 570, c. 255W-256W.]

But we are asking for evidence, which was my starting point.

With respect, the shadow Minister has slightly moved the argument. The first comment to which I replied was simply that insurance companies do not say that insurance premiums have gone down, and I gave him a simple response—that the AA has specifically said that insurance premiums have gone down by an average of about £80 for comprehensive cover. That was all I was addressing, but he has moved on to a slightly different point.

With respect to the Minister, my point was whether insurance companies say, whenever changes are implemented, that insurance premiums will go down. If he has evidence of an insurance company saying, “We expect insurance premiums to fall by 10% in the next year as a consequence of proposals introduced by the Government in response to the whiplash consultation”, I will be sceptical, but impressed, and I will monitor that to see whether it is true.

I asked the Minister a series of questions about where the Government were going on the announcement, specifically in relation to medical panels and fraudulent claims. I am grateful to him for today’s answers, but I am not sure that they take us much further. I asked when he proposes to implement the new independent medical panel scheme for whiplash claimants, and he replied that there was “no set time frame”.

I asked the Minister whether the scheme would apply to all personal injury claims, to which his reply was that it

“will apply to similar road traffic accident soft tissue injury claims”.—[Official Report, 6 November 2013; Vol. 570, c. 259W.]

With respect, that is a bit vague. I take from that that it will not apply to all personal injury claims, but to those for whiplash and similar claims. The Government need to be more precise and to define exactly what the medical panel will deal with. It would be helpful if the Minister did that today, but if not, I am sure that he will write to me about the issue.

I asked what steps the Minister was taking to ensure that insurers did not make offers to settle whiplash claims without medical evidence. I made that point earlier, and he may have misunderstood me, but I do not think that he has replied to it, specifically in relation to third-party capture and how that can be prevented. There could simply be a ban—for example, on unsolicited approaches by insurers, without the benefit of medical evidence. That issue was not covered in the answers I received today, so I would be grateful for that reply.

I asked the Minister how the new independent medical panel scheme for whiplash claimants will be funded. I am afraid that his answer was:

“We are keen to talk to stakeholders about funding opportunities which would meet the costs of setting up and running the new system”.—[Official Report, 6 November 2013; Vol. 570, c. 259W.]

I take that as, “I don’t know at the moment,” but if I am wrong, will he let me know?

I hear what the hon. Gentleman is saying, but I hope that he agrees that it is very important to get this measure right and, in doing so, to consult all the relevant stakeholders. That is what we propose to do, rather than shoot from the hip. I gave a frank and honest reply, in the expectation that we will come up with the right answer for the public, for whom this is an important matter.

This early in the Minister’s tenure, I am perfectly happy to accept his answer as it stands. However, we need to know at least the timetable for where this is going. To me, the response has the smell of a climbdown. I am sure that the Minister is absolutely sincere in wanting to tackle fraud in this area, but having gone along with how it was presented by the Secretary of State, we now need to know, factually, where we are going. The issue is important not just to victims—and to motorists and insurers—but to how the system works. Many hard-working practitioners are now scratching their heads about how things will change.

I asked the Minister what further proposals he was considering to reduce fraudulent or exaggerated whiplash claims, which was alluded to in the announcement. The answer was that the

“primary focus is on…implementation of the measures outlined in the 23 October announcement”.—[Official Report, 6 November 2013; Vol. 570, c. 259W.]

I think that that means there are none at the moment.

I also asked the Minister what steps he was taking to ensure that insurers shared more of their data on suspected fraudulent or exaggerated whiplash claims. Again, I take it that the answer is that he is looking at the matter and will come back with further proposals. Finally, I asked him for how long he has deferred any increase in the small claims threshold for personal injury claims. I take from his other answers that there are no plans to do that, at least until there has been a full review of the Jackson proposals, to which he has linked the issue, and that will some three to five years hence.

I do not want to put the Minister completely on the spot, because I appreciate that such things are not an exact science, but some certainty is needed. As I said, there has been a huge amount of rhetoric in this area, with puff stories in the Sunday papers for many years—the Government are entitled to do that—but the serious business of litigating and settling injury claims must be dealt with.

If the Government say, as they clearly now are saying, that they will not increase the limit, but might do so in future, they should state at least a minimum time that will have to pass before that can happen. I take it from the answers that until there has been a full review of the current changes—Jackson, the portal and so on—we will not return to that subject again. The fact that the Minister answered those questions has shortened my contribution, but I would be grateful for any further clarification.

In conclusion, the Government need to be more even-handed in relation to this matter. If they are, they will get a better response from all sides. The insurers feel that they have been on a roll so far. We must have no more summits with the Prime Minister or anybody else to which only one side is invited. I think we can all agree that that was a serious error of judgment; only listening to one side is never a good idea if we are to make sensible policy. The Conservative party needs to place less reliance financially on the insurance industry, which is a very substantial donor, because that is not a helpful way to go.

All of us want motor insurance premiums to continue to decline. I think the figure of £90 in the average premium is given in relation to whiplash and soft tissue injuries. That is a substantial sum, but it is far smaller than the amount spent on repair costs, car hire costs and many other areas that are open to abuse. I hope the Government will turn their attention to that matter and not be put off by the fact that the insurers are often complicit in those areas. Credit hire and inflated repair costs are a scandal. They cost far more than personal injury costs in relation to insurance premiums, and that is something that should be tackled.

One reason why there are a lot of soft tissue claims is that car safety has improved immeasurably over the past 20 or 30 years. I am talking about the structure of vehicles, the compulsory use of seat belts and other matters of that kind. People are suffering moderate soft tissue injuries where previously they would have suffered catastrophic injuries. That improvement is to be welcomed, so let us not throw the baby out with the bathwater. Let us bear down on fraud, whether it is in the area of whiplash or credit hire, and on excessive profit taking, whether that is done by claims management companies, insurers or lawyers.

We must also ensure that victims’ voices are heard. I am sure that the Minister, in many other areas of his brief, would be the first to say that that should be the case. We must not prevent the victims of road traffic accidents or of other personal injuries from being able to mount a claim and get representation, proper redress and fair compensation. The Government have been singing from one side of the hymn sheet, and it is about time they took into account both sides.

It is a pleasure, Mr Robertson, to speak in a debate that is chaired by your good self. I congratulate the hon. Member for Liverpool, Riverside (Mrs Ellman) on securing this timely debate. Indeed, this is my second debate as a Justice Minister and the second debate that I am replying to that has been secured by the hon. Lady.

On 29 October, the hon. Lady asked a number of questions in a letter to my right hon. Friend the Secretary of State for Justice. I will try to address some of those issues in my remarks today. If there is any shortfall, I will expect her to have a reply very soon.

I was a little disappointed that the hon. Member for Hammersmith (Mr Slaughter) was so critical of everything that the Government seek to do, particularly as this is something that will actually benefit the public. He asked me who the winner will be. Let me assure him that, at the end of the day, it will be the public. I hope that when I have finished my comments, he will be slightly persuaded that this is actually a good news story, rather than a negative one.

There have been some real challenges for the Government in seeking to put right some of the imbalances in the criminal justice system. Such imbalances have led to a disproportionate growth in personal injury claims, especially whiplash claims, and in the considerable costs of dealing with them. Too many claims are being brought inappropriately. We know that reported road traffic accidents have fallen from 190,000 in 2006, to 150,000 in 2012—a reduction of more than 20%. Yet at the same time, the number of personal injury claims resulting from road traffic accidents has risen from 520,000 to 820,000—an increase of almost 60%. That is a clear indication that there is a problem.

I will not interrupt the Minister every five minutes, but does he accept that whiplash claims fell by about 60,000 in the last year that figures were available, which is, I think, 2012-13? They are now down to the sort of levels of 2008-09.

If the hon. Gentleman would give me the opportunity to speak, he will find that I address a little bit later the disparity of numbers and what is a genuine whiplash claim now compared with what it was before.

It is worth noting that the proportion of road traffic accident claims that relate to whiplash has dropped to 58% recently. However, further study of Department for Work and Pensions statistics suggests that that is misleading and that a change in claims labelling may be responsible. Many claims are now labelled as soft tissue neck injuries when notified to the DWP. When those claims are considered with those labelled “whiplash”, the figure increases to around 87% of claims. Even though the number of accidents is falling, there has been a large increase in the number of personal injury claims, which is real evidence of a system crying out for reform.

As the effects of whiplash are normally felt within seven days of the accident and usually do not last more than a year, will the Minister address the point raised by the Transport Committee, which suggested that the period of limitation in such cases be reduced from three years to one year? If he cannot cover that matter today, will he write to me on that specific subject? There is a case for reducing the limitation period for these claims.

I am grateful to my right hon. Friend for his comments. The Government did indeed consider that recommendation, but we do not intend to take any action on it. The limitation period is of long standing and applies to wider personal injuries than just those in road accidents. It is important to bear that in mind. This debate is specific to whiplash claims.

The Government accept that many claims may be genuine, but many speculative, exaggerated or even outright fraudulent claims are clearly being made. It is not right that people who cheat the system should get away with it and force up the price of insurance for honest, hard-working motorists. I make no apology for targeting the exaggerated claims of whiplash fraudsters to drive down premiums.

People seemingly now claim for whiplash injuries sustained in the most minor of incidents, and Government data show that more than 1,900 claims a day are made. According to the Association of British Insurers, the cost to the industry from whiplash claims is £2 billion, resulting in £90 being added to the average motor insurance premium. That is why the Government were committed to reducing the number and cost of whiplash claims at the Prime Minister’s insurance summit last year. We need to take action to tackle speculative, fraudulent and exaggerated whiplash claims, but we must not lose sight of the needs and legitimate expectations of those who have suffered a genuine injury. A reduction in the number of such claims will lower the costs for insurers, which will in turn allow them to continue to reduce motor premiums for consumers.

Motor insurance premiums are beginning to fall. Figures published by the AA’s British insurance premium index in October, as I said earlier, show that quotes for annual comprehensive car insurance have fallen by 12% over the past year. Incidentally, regarding some remarks made earlier by the hon. Member for Hammersmith, I refer him to what the Association of British Insurers said in oral evidence to the Transport Committee. The ABI said that it expects savings from the Government reforms that have been implemented to result in a decrease in insurance premiums.

That is a good start, but the Government fully expect insurers to continue to meet their commitment to pass on the savings from the Government reforms that are driving down the costs of civil litigation. In December last year, the Ministry of Justice launched a consultation seeking stakeholder views on the creation of independent medical panels to support better diagnosis of whiplash and options for increasing the small claims threshold for personal injury claims to £5,000.

The consultation closed on 8 March. I thank all the individuals and organisations who took the time and trouble to contribute. A healthy 292 responses were received from a wide range of stakeholders, providing the Government with a strong evidence base to inform our decisions for reform.

The Government published our response to the consultation and to the Transport Committee report, “Cost of motor insurance: whiplash”, on 23 October. Our response detailed the Government’s direction of travel on whiplash reform and announced a number of reforms to the medical evidence and reporting system for whiplash claims. Exaggerated and speculative compensation claims have helped force up insurance premiums, and such unnecessary and costly claims will be targeted by the Government’s new and robust medical evidence scheme.

The new system will ensure that only evidence from fully accredited medical professionals qualified to carry out thorough medical examinations can be considered when pursuing a claim, so people who aim to cheat the system will be deterred, while victims with genuine injuries can still get the help that they need. Improvements to the system to support medical experts will include an approved accreditation scheme, new best practice guidance, better accident information and access to medical records, where appropriate, and an improved medical report form to speed up settlements.

The Government are particularly pleased that representatives from the insurance, legal and medical sectors have put aside their differences and submitted a consensus approach to improving medical evidence and reports. Such a consensus can only be positive for all involved and provides the Government with a clear mandate for our reforms. We look forward to working closely with stakeholders to build an effective and rigorous new system on that solid base of agreement. Ministers plan to meet representatives from key stakeholder groups to outline the way forward and identify experts to work with officials on the detail of the new system. It is both important and sensible to involve industry experts when designing the detailed changes. Such input will be invaluable as we work up an appropriate and effective accreditation process, methods to control the use of pre-medical offers, robust examination techniques and best practice guidance and an improved medical reporting process and report form.

Details of the most appropriate funding method for the new scheme are still to be developed, but the Government believe that there are areas of common ground with the industry. We will talk to stakeholders about funding opportunities for meeting the costs of setting up and running the new system and for ensuring that the Government achieve our intention that such costs should not fall on the taxpayer. We aim to work at pace with stakeholders on those and other issues, and we intend to start implementing improvements to the system next year. I assure the hon. Member for Hammersmith that we are actively considering a timetable for implementation.

In addition to the work on the new medical reporting scheme, the Government will also work with stakeholders to improve the provision of data relating to whiplash. As the Committee indicated in its report, accurate data and statistics are needed to have a baseline to work from. Ministry of Justice officials will be working with colleagues in other Departments and with representatives from the insurance and legal sectors, including Claims Portal Ltd, to identify and compile baseline data. That will ensure that future work in this area can be underpinned by a robust evidence base.

I appreciate all that, but in considering the cost of insurance premiums, will the Minister also consider insurance company profits? Admiral has just said that it is delivering £80 per policyholder to its shareholders—a sum equivalent to whiplash costs—and Direct Line has just announced that its overall operating profit has risen 73% in the past nine months.

I assure the hon. Gentleman that we want to get this right, and we are speaking actively with all stakeholders: insurance companies, lawyers, claimants, defendants and the judiciary where applicable. I hope that there will be consensus, and that we will get it right. If he wishes to have any input other than this debate, I will certainly welcome it. He is welcome to write to me, as indeed he has done with all the questions that I have helpfully answered in this debate.

The Government are also keen for the insurance sector to work with the claimant lawyer groups to share available data on fraudulent claims. Doing so would enable many such claims to be stopped at source. Ministry of Justice officials will work with stakeholders to assess the work undertaken so far, consider the issues on both sides that are slowing agreement and identify solutions to enable both sides to reach agreement on this vital issue.

The sharing of data on fraudsters will be of immeasurable help to claimant lawyers when considering whether to take on a case and will be a considerable step forward in the fight against fraudulent claims. However, the Government consultation document contained a further proposal on whether the small claims threshold for personal injury claims should be raised from £1,000 to £5,000. Right hon. and hon. Members already know that, following a thorough assessment of the evidence submitted to the Government from both consultation responses and from other sources, we decided to defer the raising of the small claims threshold for now. For the moment, more work is needed to support litigants in person, consider how best to regulate the personal injury claims sector, mitigate any impact on the online portal used to process road traffic accident claims where liability is admitted and assess the impact on the market of other Government reforms.

As Members will also be aware, the Government have undertaken a major programme of reform to civil litigation and costs with significant impacts on the personal injury litigation sector. The implementation of part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 on 1 April introduced major changes to no win, no fee conditional fee arrangements, the provision of after-the-event insurance and a ban on the payment and receipt of referral fees in personal injury cases.

Those reforms, and the subsequent changes to the road traffic accident pre-action protocol and associated fixed recoverable costs, have already begun to have an impact on the personal injury market. However, the Government believe that time is needed for the changes to bed in completely and for the savings that they will create to be fully realised before further reform to the sector is undertaken. I ought to make it clear that the Government have not ruled out further reform to the personal injury market. The consultation document and the Transport Committee inquiry both highlighted areas where further reform would be possible, and the Government may wish to consider such proposals in due course. However, our primary focus for now is on the effective implementation of the measures outlined in the announcement by my right hon. Friend the Lord Chancellor on 23 October.

It is also our desire to identify and eradicate dysfunctional behaviour by those who operate in this sector, and we would like all stakeholders to work together with us to address this issue. In addition, we await with interest the Competition Commission’s forthcoming report and recommendations on the personal motor insurance market.

There is an opportunity now for insurers, claimant lawyers and others to build on the recent spirit of co-operation that was shown in agreeing a sensible consensus position on medical evidence. I call on all interested parties in this market to come together to build a personal injury process that deters speculative and fraudulent claims, while providing the genuinely injured with the help and support that they need to recover from an accident.

I thank the Transport Committee for its valuable inquiry and report on the cost of whiplash claims on motor insurance premiums. The report was well-balanced and thought provoking, and it provided much useful evidence that helped to inform the Government’s final decisions on whiplash reform.

As Members are no doubt aware, Ministers helpfully agreed to defer the publication of the consultation response to allow the Committee’s recommendations to be considered in full. The Committee published its recommendations on 31 July, and my predecessor wrote to the hon. Member for Liverpool, Riverside on 25 September to propose that a combined response to the consultation and the Committee should be published. I understand that the Committee was content with this approach, and the response was published on 23 October.

As I have already mentioned, the Government agreed with a number of the Committee’s conclusions, such as those on improvements to medical reporting, data sharing and evidence gathering and on whether to raise the small claims threshold for personal injury claims, so I will not go into them again now. I should point out that the Committee’s report addressed areas where the Government felt, on balance, that change was either not required or not appropriate.

Whiplash is a complex issue and all options, including whether it would be proportionate and appropriate to make changes to primary legislation, were looked at before final decisions on the way forward were made. For example, the Government considered the Committee’s recommendation on whether to amend the limitation period for whiplash claims, and I have already dealt with that issue. As I said, the limitation period is long-standing and applies to all personal injury actions arising from negligence or breach of duty. However, the Government decided that the available evidence did not at present support such a change.

As I said in my opening remarks, we have received the letter of 29 October from the hon. Member for Liverpool, Riverside, and we hope to reply to her more substantively very shortly.

I conclude by noting that the Transport Committee issued a further call for evidence on Tuesday relating to the publication of the Government’s response document. The Government will, of course, provide an appropriate contribution, and I look forward to the Committee’s further report.

I thank the Minister for his reply. It was indeed very helpful of the Government to decide to give a joint answer to the general consultation and the Transport Committee’s report, and some of the decisions that the Government made reflect the wealth of evidence that we were able to provide in our report. However, a number of issues remain outstanding.

I was encouraged to hear the Minister say that he would consult further with all stakeholders. I hope that does indeed mean all stakeholders, and not singling out insurance companies as having some special preference. When debating this issue, it is important to remember that although we wish to root out fraud, we also want to protect the genuine claimant, and where insurance companies have promised to reduce their premiums, we must make sure that they do so without jeopardising the rights of those who are genuinely injured. I look forward to the Committee continuing its work on the subject. We will still seek answers to the specific questions that I put during the debate, but I thank the Government for their response to our report.

Question put and agreed to.

Sitting adjourned.