The fight to lower indemnity costs

Dr Michael Devlin

What lies ahead for the unbalanced clinical negligence system? Dr Michael Devlin, MDU head of professional standards and liaison, takes a disturbing look – and it’s not good news for independent practitioners.

At the last estimate, the cost of meeting future claims liabilities for the NHS in England stood at a staggering £128bn, a figure which has increased more than six-fold in the last decade. It was £17.5bn in 2011. 

This bill doesn’t exist in isolation. Every penny expected to be spent on claims means less money for patient care at a time when the NHS is already struggling to cope with a seasonal influx of patients, staff shortages and historically long waiting lists.

This is bad news for independent practitioners. 

As well as being taxpayers and patients, you may work in the NHS alongside your private practice and want both to thrive. 

And, of course, the rise in compensation costs inevitably exerts an inflationary pressure on professional indemnity for those not covered by the NHS scheme.

Dysfunctional system 

But it’s a myth that the increase in the cost of clinical negligence is something doctors can control. 

This is not a symptom of clinical care standards but of our dysfunctional legal system. 

The MDU successfully rebutted 85% of medical claims that were closed in 2021, while NHS Resolution’s chairman noted, that ‘the number of Clinical Neglig­ence Scheme for Trusts (CNST) claims reported to us has remained essentially static over recent years’. 

He observed that ‘the biggest single influence on our provision remains the long-term discount rates set by HM Treasury’. In addition, claims awards are affected by the personal injury discount rate, which is a mechanism by which compensation for future losses in claims are calculated.

The Government has at least introduced measures to reform how the discount rate is set after the chaos that followed the Lord Chancellor’s dramatic cut in 2017, which caused compensation awards to rocket overnight. 

However, it has yet to take meaningful action on three other legal reforms advocated by the MDU, which we believe would have a significant long-term impact on unsustainable claims inflation. 

Civica Medical Billing

Legal costs

A Government consultation on introducing fixed legal costs for negligence cases valued up to £25,000 closed in January 2022. However, despite expectations that the change would happen  relatively quickly, implementation has now been delayed until the Autumn. 

This is according to the Ministry of Justice, which says details will be published ‘in good time for implementation in October 2023’.

In the MDU’s view, action on disproportionate legal costs is long overdue. It cannot be right that the costs paid to claimants’ lawyers can exceed the damages paid to claimants by double or triple the amount. 

Figures in the MDU’s most recent annual report, show the average sum paid in claimants’ legal costs on medical claims settled for up to £10,000 was in excess of £18,500. 

For claims settled between £10,000 and £25,000, the average was nearly £35,000. 

Claimant legal costs are also far in excess of those for defendants. Within the NHS, claimant legal costs increased in 2021-22 by 5.1% to £470.9m, while NHS legal costs for the same period were £156.6m.  

Although we recognise the merits of introducing, in the first instance, a scheme with a £25,000 upper limit, for it to have a real impact, we believe it should apply to claims up to £250,000. We believe what the Government is proposing must be the start, not the end.

Legal reform

Section 2(4) of the Law Reform (Personal Injuries) Act 1948 is a significant if outdated piece of legislation. It pre-dates the NHS and is one of the reasons why the cost of clinical negligence is so high. 

It means that, when determining compensation in clinical negligence claims, the possibility of avoiding those expenses by taking advantage of NHS care must be disregarded and the award instead based on the cost of private provision.

The MDU has long led calls for this legislation to be repealed. It was advocated for in a number of submissions to the Commons’ Health and Social Care Committee last year during its hearing into NHS litigation, including by the MDU, the BMA and Sir Robert Francis. 

We were pleased that this was one of the recommendations in the committee’s final report, which stated: ‘Compensation should be based on the additional costs necessary to top up care available through the NHS and social care system, rather than the current assumption that all care will be provided privately.’

Unfortunately, the Government has not yet formally responded to the report, although it has expressed commitment to reform. Action on this recommendation should be a priority in 2023. 

Damages for loss of earnings

Compensation is not awarded in an equitable way under the current system, as it differentiates between high and low earners. 

The idea that the child of an investment banker who is negligently injured should receive a higher compensation settlement than the child of a refuse collector in two similar hypothetical cases is both outdated and perverse.

This was another point that we raised in our submission to the Commons’ Health and Social Care Committee. 

We called for a cap on earnings in clinical negligence compensation settlements, so those being compensated receive no more than three times the national average salary for loss of future earnings each year.

Standardising annual wage

In its final report, the committee agreed it was unfair to assess parental earnings when calculating damages for children and recommended this should be scrapped for all NHS-related clinical negligence claims for the under-18s. 

It further recommended standardising compensation against the national average wage. We await Government proposals on this.

On behalf of our independent practitioner members, we continue to raise the seriousness of this issue and the financial implications to the Government. 

Meanwhile, if you are involved in a claim, rest assured that at the MDU, we know how much your professional reputation matters. We offer members expert guidance, personal support and a robust defence. 

Find out more about the reforms of the clinical negligence system called for in our fair compensation campaign. See

The MDU is committed to championing vital reform in this area.