Meeting of the Parliament 18 December 2018
The member makes a fair point. That is why the further adjustments that we will come to—such as the 0.5 per cent deduction to pay for professional advice in this area to ensure that the injured person has all the necessary professional advice—are an important part of the protection mechanisms that the bill puts in place.
Defender groups acknowledged that the Government will have regularly to change and update the notional portfolio through secondary legislation to take into account market changes. With some time available before stage 2 of the bill, it would be advisable for the Scottish Government to stress test the composition of the notional portfolio to ensure that it does indeed provide the right balance of investments.
The second area that attracted differing views was the further margin adjustment of 0.5 per cent. Defender groups have expressed concern that this further margin adjustment will increase compensation payments beyond the level of 100 per cent, which is the general principle. They argue that a cautious portfolio, which is already baked into the legislation, is likely to produce overcompensation, so there is no need for a further adjustment to deal with the risk of undercompensation.
In the bill’s policy memorandum, the Scottish Government recognises that there is a probability of overcompensation as a result of the application of this further adjustment of 0.5 per cent. Although we understand the Government’s approach of legislating in favour of a risk of overcompensation rather than risking undercompensation, we have to recognise that this will come at a cost. The costs associated with paying more than 100 per cent of compensation will fall on insurers and ultimately on their customers, medical professionals, the national health service in Scotland, and other public bodies that self-insure.
Parliament should recognise as a matter of public policy that if the further margin provision of 0.5 per cent is passed into law, it comes at a cost.