Dear Lord Chancellor,
It is reasonable to assume that policy decisions by the overseer of the legal sector which will have dramatic ramifications for tens of thousands in the sector, not to mention hundreds of thousands, if not millions, of the public, would be likely to start by hitting the declared policy objectives.
As I understand it, there is one declared policy aim: ‘to disincentivise minor, exaggerated and fraudulent’ claims.
Incidental, but of political significance, is the statement that the reform package will ‘benefit motorists by reducing the number and cost of minor, exaggerated and fraudulent claims’ and that this will lead to ‘savings of around £1bn… on average £40 per policy’. These are your words Lord Chancellor – or, to be precise, the words you signed off, I should say.
The consultation paper foreword written by Lord Elie of Keen QC, was even more outspoken, stating: ‘The proposals are aimed squarely at tackling the compensation culture which has grown up around whiplash claims in recent years. That culture is fuelled by a substantial industry of sustained nuisance cold-calls and targeted advertising which encourages motorists to make claims when little or no injury has been suffered.’
Two observations need to be made:
1. The reform package will result in the opposite of the declared policy aims because the compensation culture you declare you intend to tackle, will be worsened; and
2. As the decision on discount rates goes a considerable way beyond negating the effect of the reform package savings, and as you, Lord Chancellor, made this decision also, the statements on insurance premium savings does not appear to be, or have been, a statement of truth.
The reason the reform package will fail is twofold. First, because you have not addressed the iniquity of acquisition cost of claims purchased by PI solicitors from CMCs and other intermediary businesses, you have stoked that market in two ways.
The value to solicitors of RTA claims will boom in the next 18 months leading up to October 2018, for the simple and foreseeable reason that solicitors who face losing their business will buy time through buying turnover.
Also, at the same time, and continuing beyond October 2018, the value of non RTA claims will be even higher, as this will be the sole sustainable volume work for PI solicitors.
The approach by solicitors (encouraged by the regulatory collusion) will be to ignore the moral tone of your declared policy. Instead, solicitors will justify their flagrant cash burn by reference to the business imperative.
The result will be not a reduction of, but a reprehensible flourishing of claims culture.
It is perhaps surprising that this very probable result of your reform package does not appear to have been seen.
With respect to the issue of insurance premiums, questions can reasonably be asked, Lord Chancellor, as to when it was clear to you personally, and those in your department, that the impact of changes in the discount rate would negate any savings resulting from ‘whiplash’ claims reform.
It would be surprising if the Ministry of Justice did not foresee that the two important policy issues would overlap with respect to the political furore over insurance premiums.
Obviously, Lord Chancellor, the decisions are made and the policies will be brought into effect.
I wonder if perhaps you might be kind enough to respond to the apparent policy- consequence difficulties I have indicated.