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Jack Straw to debate car insurance reform in Parliament**Update 9 Sep 2011: Government bans legal referral fees in car insuranceUpdate 15 Sep 2011: Jack Straw's Motor Insurance Regulation Bill proposals 04 Aug 2011 by Emma Jamieson With reference to the current political debate around the high cost of car insurance, it would appear that it is a member of the Opposition, rather than the Government, that has developed the clearest understanding of those areas in greatest need of reform.  The
Government and the Transport Select Committee have
failed, thus far, to properly address all these issues, issues that
Labour back-bencher and former Justice Minister, Jack Straw,
(pictured) first raised publically in his column in the
Times in
which he referred to referral fees paid by lawyers to insurance
companies as 'a racket'.Now Mr Straw will be able to debate these issues in Parliament, having secured a slot for a ten minute rule debate on the very first day (13 September) that the House returns after the summer recess. In the debate, Mr Straw will apply to "bring in a bill to reform the regulation and operation of the market in motor insurance; and specifically, to ban the payment of referral fees; to establish new standards relating to the evidence required and damages payable for whiplash; to reform the regulation of the Ministry of Justice’s RTA portal; to set requirement in respect of risk pricing for personal injury claims, and for related purposes.” Ten minute rule debates can lead to private members bills but they are more usually a means for politicians to raise issues in the House. Straw's comments thus far in relation to car insurance reform have already proved influential. It has been his input, more than that of any other party, that has led to the Government rethinking its position on a referral fee ban with a ban now looking likely. They had until now resisted this recommendation from the Jackson Review of costs in civil litigation despite their acceptance of most of Jackson's other recommendations. Similarly, insurers Axa and Zurich would not have decided to stop accepting referral fess from lawyers if Straw had not spoken out. With regard to spiralling whiplash claims following road traffic accidents that has led to the UK being dubbed the whiplash capital of Europe, Straw correctly identifies that it is currently too easy to secure compensation for whiplash simply by alleging neck pain to a suitably qualified individual. While there is no diagnostic test that either proves or disproves whiplash, it has been muted that the requirement should be for it to be shown to be present as an alternative to the current position that the defendent car insurance company must show that it is not to avoid the requirement to compensate. Each whiplash case costs insurers, on average, almost £4,000 and 25% of all car insurance claims include an injury claim, of which 80% include whiplash. The medical profession does need to develop clearer guidelines for the diagnosis of whiplash and any research that leads to their development might usefully be supported by the insurance industry. The Road Traffic Accident (RTA) claims portal, which Mr Straw also wishes to reform, currently provides a fast track, fixed costs, means of settling claims worth under £10,000. The Government plans to raise the limit to a level, as yet, undecided, but it could be as much as £50,000. However, the system does not function optimally as most claims fall out of the three month 'protocol period' before insurers admit liability leading to additional legal fees charged at an hourly rate. If referral fees were banned, the current legal fees for use of the portal could also be slashed from the current £1,200 given that much of this fee meets the cost of the referral fee paid by the lawyer to the referring agent. Clearly Mr Straw would like to tighten this system up to render it more effective at settling claims in a timely and cost-efficient manner. His desire to "set requirement in respect of risk pricing for personal injury claims" will doubtless be clarified by Mr Straw in his statement to the House but it would appear to indicate that he believes that success fees paid to injury lawyers should be under greater legislative control than the Government currently proposes in its reforms whereby success fees would be capped at 25% of the general damages award and would no longer be recoverable from the defendent car insurer but would not otherwise be under legislative control. With almost thirty million cars on our roads, the high cost of car insurance matters to most voters. That Jack Straw has decided to be the motorist's champion and has forced the Government to consider the issues in a better informed and focused way will be welcomed by the nation's cash-strapped drivers. |
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