Government to clamp down on phoney whiplash claims
MPs have appealed to motor insurance companies to cut out ‘sharp practices’ in a bid to control escalating premiums.
The cost of motor insurance has spiralled due to market dysfunction and a rise in the number of uncontested claims for whiplash injury, according to a Transport Committee report.
Louise Ellman, Chair of the Transport Committee, accused insurers, solicitors and claims management companies of driving up the cost of motor premiums by encouraging people caught up in road accidents they did not cause to claim for personal injury, car hire, and other legal costs.
“Although we strongly support access to justice, drivers should not be railroaded by cold callers into launching legal action,” she commented.
“The insurance industry must abandon sharp practices that push up premiums such as passing drivers’ personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms.”
Very costly
Mrs Ellman [pictured right] also singled out the rise in personal injury claims as the main reason for pricier premiums.
“Many of these claims are for whiplash, an injury where diagnosis is often subjective and therefore very costly for insurers to challenge,” she added.
“The threshold for receiving compensation in whiplash cases should be raised and, if the number such claims does not fall significantly, the Government should bring forward primary legislation to require objective evidence – both of a whiplash injury and of it having a significant effect on the claimant’s life – before compensation is paid.”
The Committee called for the Government to:
- Review how well the ‘pre-action protocol’ and ‘online portal’ established to handle low value insurance claims have operated since their introduction in 2010. Results should be published within six months.
- Establish a cross-departmental ministerial committee on reducing the cost of motor insurance and publish a plan to address each aspect of the problem.
- Send a clear message to the insurance industry that it expects 2008 data protection legislation to be fully respected and impose stricter penalties for any breach.
- Initiate an investigation of cold calling undertaken to generate personal injury claims and then examine the legal and regulatory options for curtailing this activity.
Absolutely critical
Nick Starling [pictured left], Director of General Insurance at the Association of British Insurers, welcomed the recommendations and deemed them “a step in the right direction”.
“It is absolutely critical that Britain’s whiplash epidemic is tackled once and for all,” he said.
“Every motorist wants the best deal and insurers are determined to deliver value for money motor insurance.
“Our customers are fed up of getting text messages, fed up of the compensation culture and have had enough of paying higher car insurance premiums to line the pockets of ambulance chasing lawyers and claims management companies.
“We are baffled though that the Transport Select Committee has again called for the transparency of referral fee arrangements of insurers. Referral fees should be banned altogether and not made more transparent – and that ban should apply to all organisations receiving them, not just insurers. Banning referral fees and, crucially, reducing legal costs will improve the situation for customers.”
Graeme Trudgill, Head of Corporate Affairs with British Insurance Brokers’ Association (BIBA) agreed: “Although the current system is flawed, BIBA does not believe banning referral fees is a panacea in itself, or that the end of these fees will directly reduce motor insurance premiums.”
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