News story

Government acts on compensation culture

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The latest stage of a series of reforms to turn the tide on the growing compensation culture has taken effect.

From today the fees lawyers can make from processing basic, uncontested claims for compensation for minor injuries suffered in road accidents will be reduced by more than half – from £1,200 to £500.

The change will:

  • make no difference to the amount of compensation victims will receive for genuine claims.
  • reduce the unnecessary additional bills faced by insurers.
  • enable insurers to pass on savings to their customers.

It is part of a package of reforms which have taken effect in recent weeks to tackle the high cost of insurance premiums. These have affected not just drivers but also schools, groups and authorities trying to insure themselves so they can stage events and activities.

These reforms also include:

  • no win, no fee law suits have been transformed so lawyers will no longer be able to double their fees if they win, at the expense of defendants and their insurers.
  • “referral fees” paid between lawyers, insurers, claims firms, garages and others for profitable claims have been banned. Recommend a friend deals will also be banned.
  • claims firms have been banned from offering upfront cash incentives or other gifts to people who bring claims to them.

Justice Secretary Chris Grayling said:

“We are turning the tide on the compensation culture. It’s pushing up the cost of insurance, and making it more expensive to drive a car or organise an event. It’s time the whole system was rebalanced.”

Today’s changes will not be the end of the Government’s work to tackle the growth of compensation culture.

From Wednesday 31 July 2013 the Claims Portal, used by lawyers and insurers to settle payouts for road accidents quickly and simply, will be extended to also include claims for accidents at work and in public places. It will also start handling claims up to the value of £25,000 (the current maximum is £10,000).

Action is also being taken to crack down on the number of whiplash claims – the Ministry of Justice has consulted on proposals including setting up independent medical panels to improve injury assessment and increasing the small claims court limit so more questionable claims can be challenged in court by insurers.