On 15 July, Gauke announced that the rate would rise from -0.75% to -0.25% on 5 August.

In a 77-page report dated 25 June 2019, the Government Actuary’s Department had recommended that the rate be set at 0.25%.

Responding to the government actuary as part of yesterday’s announcement, Gauke referred to the department’s analysis as “a starting point for my determination rather than an end point”.

Disagreement

In a letter to Gauke, Clarke calculated that a rate of 0.25% would have a 50:50 likelihood of overcompensating and under-compensating the average claimant.

The Lord Chancellor regarded this 50:50 split as an unacceptable compromise. As an example, he highlighted that it would give claimants only a 65% chance of receiving 90% compensation.

Gauke noted: “I consider this to give rise to too great a risk that the representative claimant will be under-compensated, or under-compensated by more than 10%”.

It was decided that claimant outcomes should be more heavily weighted towards over-compensation, consequently pushing the Ogden rate below the recommended 0.25%.

Gauke did concede that the decision “involves making a series of assumptions and judgements in considering the evidence and economic variables that apply” but insisted he should “build in further prudence” in “order to recognise that in any individual case one or more of those baseline assumptions may not apply”.

Credit to Insurance Age for the original article

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The bill was passed without any further amendments by a majority of 56. The Bill now passes back to the House of Lords to consider the amendments made during the Commons debates.

A full overview of the Civil Liability Bill and the changes made to date can be viewed and downloaded here.

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The Ministry of Justice (MoJ) has confirmed the government will delay its whiplash reform measures from 1 April 2019 to April 2020. The news was delivered in an MoJ response to the Justice Select Committee’s report on Small Claims Limit for Personal Injury.

In its response the MoJ wrote: “The government is acutely aware that the proposed approach will fundamentally transform how whiplash claims are handled and that any concerns around access to justice have to be addressed promptly.

“There will need to be extensive user testing in order to ensure that the system is easy to use for all user groups and that the guidance is clear.”

The MoJ noted that it was crucial the reforms, and implementation of the online portal, was “done right rather than quickly”. Adding: “This is why the government is now proposing for the platform to be ready for large-scale testing by October 2019 with the view to implementing the whiplash measures, including the rise in the small claims limit to £5,000, fully in April 2020.”

Reaction from stakeholders

The Association of British Insurers stated it was pleased that the MoJ “remains committed” to the changes. James Dalton, director of general insurance policy commented:

“Getting the implementation of these reforms right is absolutely critical if the system is to deliver fairer outcomes for claimants and millions of motorists so it is sensible to delay implementation until April 2020.”
Andrew Twambley, spokesperson for Access to Justice (A2J) also welcomed the delay but also criticised the overall changes:

“Creating, testing and implementing new user-friendly technology to deal with injury claims is enormously complex, and the government’s IT track record is dreadful,” said Twambley. “Ministers have yet to explain why a computer, built and administered by insurers, is better for injured people than a legal professional who is 100% on the side of that injured person”. “The MoJ has again ducked this question in its response to the Select Committee.”

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Peers defeated a proposed amendment from a former lord chief justice, the crossbencher Lord Woolf (Harry Woolf), to remove tariffs for limiting damages in the Civil Liability Bill. The vote, which followed more than two hours of debate, was won by the government by 218 to 205.

The vote at the report stage in the Lords will be a bitter pill to swallow for campaigners who had pinned their hopes on the upper house putting pressure on the government to amend its plans. It is now unclear what, if any, further efforts can be made to have the legislation further redrawn, as it moves onto the House of Commons.

The government did make one concession, pledging to bring forward at third reading an amendment to require the lord chancellor to consult the lord chief justice before setting or amending the tariff.

Full article on the Law Gazette – https://www.lawgazette.co.uk/news/civil-liability-bill-government-secures-crucial-win-by-just-13-votes/5066460.article

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“To listen to some of the pessimism expressed within our industry since Theresa May’s election announcement, you could be forgiven for believing the snap poll on June 8^th is a hammer blow to our chances of progress on whiplash, the Discount Rate, pensions dashboards and welfare reform. I couldn’t disagree more.

The PM’s decision to call an election is not just an entirely rational piece of political decision making, capitalising on her opponents’ polling weakness and catching them unawares with little time to prepare a full campaign. It also offers the opportunity for her to fully legitimise her premiership, strengthen her ability to get legislation through Parliament and negotiate a Brexit deal without the pressure of an impending electoral test. For anyone within our sector who was optimistic about the chance to make progress on a range of important policy areas with the current Government, the chance to do so with that Government strengthened after the short delay of a six week election campaign should not be a cause for concern.

Most concern has focused on the delay to potential reform of the Discount Rate in the Prisons & Courts Bill which also contained measures to tackle whiplash claims abuse. Having only just been introduced into Parliament, the Bill cannot be fast-tracked onto the statute book ahead of dissolution and so will have to be reintroduced following the first Queen’s Speech of the new Parliament in June. As the Government’s Discount Rate consultation does not close until May 11^th anyway and the scope of the currently tabled whiplash proposals is full of loopholes, our industry should view this as an opportunity to win the argument and get the right Bill, rather than proceed with a flawed one.

Nor on the Pensions Dashboard project is it terminal for it to be subject to a short delay; ministers needed time to take a decision on whether to proceed with the next phase anyway. Following the ABI’s successful delivery of the prototype, on target and under budget, delivery by 2019 is still possible if given the ministerial go-ahead in the second half of June.

That leaves welfare reform where the current Government has grown increasingly warm to the potential role of protection insurance in meeting the challenges of workplace ill-health. As with the Discount Rate, the Government has its own reasons for wanting to find a better system which costs the taxpayer less and enables the insurance market to risk-share effectively. So we should continue to develop our analysis to influence a white paper that could emerge as part of a re-elected government’s agenda.

On tax, we should continue to expect that pension tax relief reform could feature either in party manifestos or in the autumn Budget given the Chancellor’s obvious problems delivering on the 2015 manifesto commitments while managing the public purse.  As an industry that campaigned for a more sustainable single rate system with less restrictive allowances, we have nothing to fear from this debate and should engage in it. By contrast, any major promises not to raise direct taxes will have to be paid for by indirect taxes which makes our customers vulnerable to more IPT increases.

Finally, Brexit. Contrary to some of the more lurid headlines, the Brexit negotiations are likely to be involved, technical and packed with trade-offs. Whatever the final outcome, any PM’s ability to navigate this tortuous path can only be helped by having their own democratic mandate, a potentially more secure Commons majority and without having to fight an election within the first year of a deal being struck.

This blog, of course, assumes a Conservative victory in line with the polls. The impact of a Labour victory is harder to predict because of the lack of detail so far in the Labour programme, the carousel of shadow ministers since 2015 and the high level hostility to financial services manifested by the Leader of the Opposition and Shadow Chancellor. We will prepare for all outcomes and, as ever, remain politically neutral. But on the basis the polls are broadly right, our industry should view this election as a delay rather than a disaster.”

Thanks to the ABI’s Blog section for this article –

https://www.abi.org.uk/news/blog-articles/general-election-2017-opportunity-or-obstacle/

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The Government Actuary’s Department has published supplementary tables to the 7th edition of the Ogden Tables to reflect the recent change in the discount rate. The new multipliers have been calculated based on the same assumptions as those underlying the current tables.

The Lord Chancellor recently announced the discount rate would be significantly reduced from 2.5% to minus 0.75%. The Ministry of Justice noted the current legal framework makes it clear that claimants must be treated as risk averse investors, reflecting the fact they may be financially dependent on this lump sum, often for long periods or the duration of their life.

Revisions live from 20th March 2017

The amended discount rate will apply from 20 March 2017 and looks set to cost insurers billions of pounds. According to estimates by accounting firm EY, the move will result in a reserving impact in the region of £3.5bn for outstanding claims.

The Government has advised it will review the framework under which rate is set to ensure it remains fit for purpose in the future. A consultation is being launched before Easter that will consider options for reform including:

• Whether the rate should in future be set by an independent body.
• Whether more frequent reviews would improve predictability and certainty for all parties;
• Whether the methodology is appropriate for the future

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