Aviva, the insurance company, has certainly fluttered a few feathers with the publication of its recent report ‘Road to Reform: Tackling the UK’s Compensation Culture’ which proposes replacing compensation for minor injuries (the focus being primarily on whiplash compensation) sustained in road accidents with payment for medical treatment. In addition the recommendations include restricting the involvement of personal injury solicitors in settling claims by raising the threshold at which they can act for claimants from £1000 to £5000; and banning referral fees for vehicle recovery, repairs and car hire. In total the insurer estimates that by implementing all its recommendations, motor insurance premiums could be reduced by £50 a year. The cost of motor insurance is a topic that has been chewed over by present and past governments, citing fraud, high legal costs and aggressive claims management companies as a blight on the insurance industry and responsible for the spiralling costs of annual premiums. Aviva has expressed hope that its report will help to generate the public debate around compensation for low-value claims called for by the Association of British Insurers (ABI).
Reducing the cost of motor insurance premiums
Since 2012 the Association of British Insurers has calculated that motor insurance costs have fallen by 14%, largely helped by the introduction of the civil litigation reforms last year, which saw the removal of referral fees between personal injury solicitors, claims companies and insurers (source: Association of British Insurers). However, Aviva has calculated that premiums could fall even further by removing claims for minor injuries which represent approximately 45% of the annual £2bn cost of personal injury claims. The report compared the number of personal injury claims made in the UK with other European countries. In France, for instance, only 3% of claims are for personal injury compared with 97% in this country. There is a belief that the current system, fostered by personal injury solicitors and claims management companies, encourages individuals to make claims for minor personal injuries as an easy way to get cash. Lurid tales about the ‘compensation culture’ driving up motor insurance premiums have been fuelled in recent years by evidence of ‘crash for cash’ – whereby fraudsters deliberately drive into another motorist with the explicit intention of claiming for whiplash. Aviva estimates that the number of fraudulent ‘slam-ons’ increased by 51% in 2013, costing insurers £392m a year (source: Insurance Fraud Bureau).
Victims of motor accidents under compensated
Parliament’s Transport Select Committee has been very exercised by this subject. In its fourth report since 2010 into the cost of motor insurance, it refers to the “dysfunctional” market laying much of the blame for the current situation at the feet of the insurers which it accuses of encouraging fraudulent behaviour, not least by settling whiplash claims without the benefit of a genuinely independent medical examination, a practice the Committee wants to see banned. The Association of Personal Injury Lawyers (APIL) agrees that the lack of medical examination is almost certainly contributing to fraudulent claims and contends that, contrary to public perception, the existence of a ‘compensation culture’ is much exaggerated. According to APIL, the number of claims generally has fallen across all sectors and to blame solicitors or the legal system for the high cost of insurance premiums is disingenuous. The vast majority of personal injury solicitors are professional and responsible, acting in the best interests of their clients and the removal of legal representation for claims below £5000 and the removal of compensation for minor injuries should be resisted for two good reasons. First, applying directly to the at-fault insurer for the cost of rehabilitation suggests a potential conflict of interest; some insurers may be inclined to drag their feet over payments thus worsening the effects of the original accident. Second, many injuries which may appear at first glance to be minor may well, if not appropriately treated immediately, be more serious or require much longer recuperation than initially anticipated, the cost of which is unlikely to be covered by the original rehabilitation payment.
Summary
From our experience, very few people come to us with claims that have no merit. The vast majority have been adversely affected by the accident, having to take time off work, hiring a replacement car, needing additional help at home while they get better. Preventing genuine claimants from claiming compensation is unhelpful and rarely likely to be in their best interests. What we cannot do is stop people from behaving fraudulently and the introduction of an independent medical examination will help to deter such individuals from cashing in. This is clearly a debate that has some way to run and, although the Aviva proposal is probably not the answer, the fact that they are adding constructive fuel to the discussion can only be welcomed.
