Whiplash Injury Compensation

17:05:00

I beg to move, That the draft Whiplash Injury (Amendment) Regulations 2025, which were laid before this House on 20 March, be approved. This draft instrument amends the fixed tariff for whiplash compensation set by the Whiplash Injury Regulations 2021 by applying an inflationary uplift to the tariff values. In doing so, the amendment gives effect to recommendations made by the Lord Chancellor on 21 November 2024 following the completion of her statutory review of the 2021 regulations. By adjusting the whiplash tariff values to account for inflation, the Government will ensure that claimants can continue to receive proportionate compensation until the next review in 2027. The whiplash reform programme changed the way claimants are awarded damages for low-value whiplash injuries following road traffic accidents. The aim of the reforms was to ensure an efficient, proportionate and reliable system for both claimants and defendants involved in road traffic accident-related whiplash claims. At their core, the measures aim to reduce the number and cost of whiplash injuries and deliver savings to consumers via reduced motor insurance premiums. Elements of the reform programme were delivered by the Civil Liability Act 2018, which introduced several important changes to the civil claims process. Alongside measures that introduced a legal definition of what constitutes a whiplash injury and banned the settling of such claims without medical evidence, the 2018 Act empowers the Lord Chancellor to set a fixed tariff of damages for road traffic accident-related whiplash injuries lasting up to two years. The 2018 Act measures were supported by additional secondary legislative changes to increase the small claims track for road traffic-related personal injury claims from £1,000 to £5,000, and the introduction of a new pre-action protocol for personal injury claims below the small claims limit in road traffic accidents. At the same time, the insurance industry-owned and developed Official Injury Claim portal was launched to assist claimants affected by the reforms. The first whiplash tariff was set by the Whiplash Injury Regulations 2021, which came into force on 31 May 2021. The 2018 Act requires the Lord Chancellor to review the 2021 regulations, and thereby the whiplash tariff, within three years of its implementation and every three years thereafter. In fulfilment of that statutory obligation, the first review of the whiplash tariff was completed on 22 May 2024 and the Lord Chancellor published her report of the statutory review on 21 November 2024. Upon reviewing the 2021 regulations, the Lord Chancellor concluded that the structure and component parts of the whiplash tariff were effective. However, she recommended that the tariff amounts be uprated to account for consumer prices index inflation between 2021 and 2024, and to incorporate a three-year buffer to account for expected inflation until 2027. She did not consider that any other changes to the 2021 regulations were necessary. In reaching her conclusions and recommendations, the Lord Chancellor took into consideration relevant industry and courts data, as well as information from a Ministry of Justice call for evidence, which ran from 6 February to 2 April 2024. In accordance with the review, this statutory instrument increases the whiplash tariff damages values and, subject to approval by both Houses, the new tariff will apply to all road traffic accident-related personal injury claims in England and Wales from 31 May 2025. I believe that the House will find it helpful if I provide some additional explanation of the increase that will be applied to the whiplash tariff. By way of background, I should say that the whiplash tariff operates via a rising scale of fixed compensation payments determined by injury duration, up to a maximum of two years. The payments in the original whiplash tariff set in 2021 range from £240 for whiplash injuries lasting three months or less to £4,215 for whiplash injuries lasting between 18 and 24 months. There is a separate, slightly higher, tariff for cases where any minor psychological injury, such as low-level travel anxiety, is incurred at the same time as the whiplash injury. Claims for whiplash injuries that last longer than two years fall outside the fixed tariff. When the tariff was first implemented in 2021, the amounts were set to include a three-year buffer. The buffer was designed to account for expected inflation, according to the available forecasts at that time, and to ensure that claimants were not under-compensated in the years between the tariff’s implementation and the first statutory review. In reviewing the 2021 regulations, the Lord Chancellor recognised the impact of inflation on the whiplash tariff amounts, noting that inflation over the first three-year period ran at a higher than expected rate, and, as most respondents to the 2024 call for evidence had noted, the real value of the tariff had fallen. In the light of this, she concluded that the tariff should be uprated by actual inflation between 2021 and 2024, and should again include a buffer to account for the expected inflation until the next review in 2027. The whiplash tariff will therefore be increased by around 15% for claims arising from road traffic accidents occurring on or after 31 May 2025. As I have mentioned, this increase has been calculated using the consumer prices index inflationary measure. After careful consideration of the available data and evidence, the Lord Chancellor determined that CPI remains the most appropriate measure for uprating the tariff amounts by inflation. In contrast, she considered that the alternative retail prices index measure, if applied, would likely overstate inflation. It is worth noting that the use of CPI is in line with common practice across Government, as recommended by the Office for National Statistics. In accounting for inflation, the Lord Chancellor also decided that the whiplash tariff should continue to be future-proofed by applying a CPI rounding over three years from 2024 to 2027. This approach is consistent with the method used to protect claimants from additional inflationary impacts when the first whiplash tariff was set in 2021. While this three-year buffer could lead to some over-compensation in the short term, not implementing it would allow the real value of claimants’ damages to decrease and risk significant under-compensation in the long term. Therefore, this buffer protects access to justice and minimises the risk of claimants being under-compensated in the years leading up to 2027. I would, though, like to acknowledge that some respondents to the call for evidence expressed concern that the buffer would artificially increase the amount of compensation available and potentially undermine cost savings. However, the difference in the tariff levels using the buffer is not substantial enough to significantly impact on savings. The tariff amounts are only being adjusted to account for inflation and, as such, it is our view that this does not represent a real-terms increase in claim values. Conversely, I am aware that other stakeholders suggested that the whiplash tariff should either be subject to an annual review or be index-linked to inflation to ensure annual increases. As the Lord Chancellor made clear in her report, these arguments are not compelling. A three-year review period, as anticipated by the 2018 Act, strikes the right balance between adequately compensating claimants and maintaining a stable system that is as simple to understand and administer as possible. It is also worth noting that the recent high inflationary cycle was driven by a unique set of circumstances and is not a regularly occurring event. Therefore, while it is appropriate that the whiplash tariff is regularly reviewed against inflation, three years is the appropriate length of time to hold such reviews. Other than uprating the whiplash tariff to account for actual and expected inflation, as I have explained, no other amendments to the 2021 regulations are made by this instrument. In accordance with her statutory obligation, the Lord Chancellor has consulted the Lady Chief Justice before making this instrument. The Master of the Rolls, acting on behalf of the Lady Chief Justice, expressed his endorsement of the proposal to uprate the whiplash tariff. He also noted that the judiciary would not welcome any further derogation from the principle that damages are assessed and awarded by the courts. As we have seen, in accordance with the powers conferred on the Lord Chancellor by the 2018 Act, the instrument only adjusts the level of damages for whiplash injuries lasting up to two years. The amendments that this instrument will make to the 2021 regulations represent a balanced, proportionate and practical approach to uprating the whiplash tariff ahead of the next review.

I call the shadow Minister.

17:14:00

As the Minister explained, the Government have conducted their statutory review of the Whiplash Injury Regulations 2021 and determined that, while the existing tariff structure remains appropriate, an inflationary uplift is required. The proposed amendments will increase compensation for whiplash injuries occurring on or after 31 May 2025 by 14% to 15% across all tariff bands. That adjustment accounts for inflation since 2021 and provides an additional buffer for expected inflation until the next statutory review in 2027. The framework of the tariff remains unchanged, including the two-tier structure for “whiplash only” and “whiplash with minor psychological injury”, the requirement for a single medical report to support a claim, and the option for a discretionary uplift of up to 20% in exceptional cases. The review process highlighted challenges in determining prognosis due to inconsistencies in medical reporting. The Ministry of Justice has committed to working with the pre-action protocol medical report provider MedCo to improve the clarity and quality of medical reports, and we welcome that commitment. I understand that the Treasury is due to report later this month on whether insurers have, in fact, passed savings from these reforms on to policyholders—the primary, or certainly an important, aim of the policy’s original intention. It is important that motorists receive the anticipated lower premiums. We look forward to the findings of the review, and it would be helpful if the Minister confirmed that it is on track. Furthermore, while the statutory instrument is limited to amending tariff amounts, it forms part of a wider framework of reforms to be reviewed. A post-implementation review of the whiplash reform programme is due to take place in 2025-26, and we welcome the opportunity to assess its effectiveness in delivering fair compensation and maintaining access to justice. We support the regulations and recognise their role in ensuring that claimants continue to receive fair and proportionate compensation. We look forward to the continued monitoring of the system to ensure that it remains balanced and effective. Given the extensive and thorough review of the regulations provided by the Minister, I do not seek to comment any further.

I call the Liberal Democrat spokesperson.

17:17:00

The changes today are simple: the compensation tariffs for pain, suffering and loss of amenity in whiplash claims are being uplifted by approximately 15% to reflect inflation since the original 2021 figures were set, with a buffer to account for future inflation. These updates are welcome, but also present us with an opportunity to reflect on the broader balance we strike between tackling fraud and protecting the rights of those with legitimate injuries. Whiplash has long been a contentious area of UK personal injury law. We have one of the highest rates of whiplash claims in the world, which has undoubtedly contributed to the rise in motor insurance costs, and whiplash claims have historically added billions of pounds to insurance costs. In my constituency of Chichester, the picture is particularly concerning. According to a study by the Driving Instructors Association, Chichester is now the most accident-prone city in the UK, reporting 232 accidents per 100,000 residents, which is 54% higher than the national average. Even more alarmingly, Chichester has the highest fatality rate of any city, at 5.6 fatal accidents per 100,000 residents. These are not just statistics; they are lives lost and families changed forever. That underlines the real-world impact of road safety and why fair, accessible compensation for those injured on our roads is vital. The 2021 reforms that introduced fixed tariffs and mandatory medical assessments have had an impact, and the number of whiplash claims has declined, but whiplash still accounts for a large share of personal injury claims, and the need to ensure fairness in the system remains. We must remember that behind every claim is a person, often in pain, unable to work, potentially scared to go back out on the roads and navigating an unfamiliar legal system. For them, the process must be simple, fair and accessible. Victims should never be discouraged from seeking rightful compensation because of excessive bureaucracy or overly rigid procedures. That is why the Liberal Democrats have consistently advocated for a balanced approach. During debate on the Civil Liability Act 2018, my colleagues in the other place, Lord Sharkey and Lord Marks of Henley-on-Thames, worked hard to push for stronger safeguards. They argued that the definition of “whiplash injury” should be written into primary legislation to allow full parliamentary scrutiny, and they pushed for compensation to be based on Judicial College guidelines, not simply on fixed tariffs, to preserve judicial discretion and to reflect the severity of injuries. They also urged the previous Government to ensure that any savings made from reducing fraudulent claims are passed on to consumers through lower insurance premiums—a promise that the insurance industry has been slow to honour and which is certainly not reflected in the consumer experience. We also look forward to the findings of the review on whether those savings have been delivered to customers. We continue to support a system that is firm on fraud but fair to victims. Yes, we need robust safeguards, such as mandatory medical assessments and closer co-ordination between regulators, insurers and law enforcement to root out dishonest claims, but that must not come at the expense of those with genuine injuries. It is critical that review mechanisms are in place not just to track inflation, but to assess whether the tariff system continues to serve justice. We believe that the Government must do more to simplify the claims process, particularly for those who do not have or cannot access legal representation. The updated tariff is a necessary correction for inflation, but it must not be seen as the end of the matter. The long-term success of the system depends on three things: maintaining fairness for claimants, preserving judicial discretion where needed and ensuring that promised savings are felt by customers. We must remain focused on people, not just on policy.

17:21:00

I thank hon. Members for their contributions to the debate and for the support of the Liberal Democrats and the official Opposition on the direction of travel. I am grateful to the Liberal Democrat spokesperson, the hon. Member for Chichester (Jess Brown-Fuller), for reminding us that behind every claim is a person, and that this is about helping real people and real lives. The official Opposition spokesman, the hon. Member for Bexhill and Battle (Dr Mullan), rightly mentioned the report on reducing insurance costs for consumers. We share his and the Liberal Democrat spokesperson’s concern about that, which I think is felt across the House. The report was published on 27 March and shows that the whiplash reforms have reduced insurance costs for customers. It was produced by His Majesty’s Treasury, which worked with the Financial Conduct Authority to fulfil its statutory obligation under section 11(7) of the Civil Liability Act 2018. Although it is a factual reporting of the information from insurers provided to HMT through the Financial Conduct Authority, it does not represent the Government’s view, so it is right and proper that, separately from the report, the Ministry of Justice will undertake a post-implementation review of the whiplash reforms later this year. I thank hon. Members for their contributions.

I am sure I heard the Minister ask for the leave of the House at the beginning of his remarks. Question put and agreed to.