The Ministry of Justice has announced that the Civil Liability Bill will set out proposed reforms to the discount rate and whiplash claims.

The Civil Liability Bill will introduce two major changes to the personal injury compensation system in England and Wales, including the long awaited proposals for the changes to the discount rate.

The Bill will also set out the proposed changes to the system for the compensation of whiplash injuries, including the introduction of a tariff scheme.

Discount rate

According to the Ministry of Justice (MoJ), the discount rate measures in the Bill will:

  • support the 100% compensation principle;
  • modernise the way the discount rate is set so that it reflects the reality of how claimants actually invest their money; 
  • put the process of setting the rate on a clearer statutory footing, with a requirement for the Lord Chancellor to review it at least every 3 years, giving clarity and assurance to claimants and to those who underwrite the costs; and
  • create an independent expert panel to advise the Lord Chancellor in order to help ensure that the rate is set fairly and transparently in future. The regular setting of the rate will make sure that vulnerable people who have had life-changing accidents have their compensation adjusted by an up to date rate.

It appears that the Civil Liability Bill will follow the proposed methodology of the MoJ's draft legislation in setting the discount rate, with consideration being given to the actual investment practices of claimants and the investments available to them. The MoJ previously indicated that if the rate was calculated now on the basis of the proposed methodology, it may be between 0 and 1%.

The Justice Committee agreed that setting the discount rate to reflect "real world" claimant investment behaviour was needed.  However, they called for further evidence in relation to this issue to be produced by the Government before the draft legislation is progressed.  The Government's response is expected to be published shortly, and may give further indication of what level the discount rate is likely to be set at under the new rules.

Whiplash

The MoJ have indicated that the proposed whiplash reforms will deal with the following measures:

  • provide for a tariff of compensation for pain, suffering and loss of amenity for whiplash claims as defined in the Bill.  The final tariff figures will be set in supporting regulations to be debated via the affirmative procedure by Parliament following Royal Assent;
  • introduce a regulatory ban on seeking or offering to settle whiplash claims without medical evidence; and
  • provide for the Judiciary to increase the compensation payable for pain, suffering and loss of amenity by up to a certain amount in exceptional circumstances.  The cap for exceptional payments would be set in supporting regulations.

We have previously provided a detailed analysis of the whiplash proposals which appear to remain unchanged from their previous iterations.

The Civil Liability Bill does not deal with the proposed changes to increase the small claims limit for road traffic related personal injury claims from £1,000 to £5,000, and for all other personal injury claims from £1,000 to £2,000.  These proposals are being considered by the Civil Justice Committee and their report is expected shortly.

A detailed analysis of the Civil Liability Bill and the implications for stakeholders across the industry will be provided following publication in the coming days.

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