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General liability

Published on 17 January 2018

In this chapter of our Annual Insurance Review 2018, we look at the main developments in 2017 and expected issues in 2018 with regards to general liability.

Key developments in 2017

In February 2017, the Lord Chancellor amended the discount rate from 2.5% (the level at which it had stood since 2001) to minus 0.75%. While a review of the rate had been a long time coming, such a drastic alteration had not been expected. It caused an uproar across the insurance industry, which rallied against the new rate.

The alteration to minus 0.75% has had a significant impact on the value of personal injury claims, and many argue that at such a level claimants are currently being over-compensated (although some argue that claimants had been under-compensated for several years).

The reaction to the change led to a review of the entire rate-setting system by the Government, which has proposed changes to the way the rate will be set in the future: the discount rate will be reviewed at least once every three years; the methodology for calculating the discount rate shall be revised, with claimants assumed to be low-risk investors (rather then very low-risk as it stands); and the Lord Chancellor will in future determine the discount rate in consultation with an expert panel made up of actuaries, an investment manager, an economist, and an expert in consumer affairs.

Ministry of Justice spokesman Lord Keen has targeted early 2018 for the introduction of the proposed legislation, with a review of the discount rate to follow later in the year.

What to look out for in 2018

The Government has announced its intention to increase the small-claims limit for personal injury claims.For road traffic accident (RTA)-related personal injury claims the limit will increase to £5,000, and for other personal injury claims (employers’ liability/public liability) to £2,000.

In respect of RTA claims, the Government has also proposed a tariff system for calculating damages for whiplash claims, starting at £225 for a 0–3-month injury and rising to £3,725 for a 24-month injury. Such a change will have a significant impact on those claimant firms that operate a model focusing on high volume,low-value work. With solicitors unlikely to take on such claims (since they will not attract payment of costs), there is expected to be a rise in the number of claims being pursued by litigants in person.

The Government also proposes to introduce fixed fees into clinical negligence claims. The intention had been for fixed fees to be introduced by 1 October 2017. However, the timetable proved to be too tight. We expect this issue to remain on the table for 2018.

Download our full Annual Insurance Review 2018 for more insights.