Claims controversy continues

Claimant lawyers’ groups have hit back at insurers’ claims that they “manipulate” the system, charge “excessive” fees, and leave consumers worse off.

The Association of British Insurers (ABI) made the accusations in a report published this week, which was backed by business groups and retailers including Lloyd’s and Argos.

The report, Tackling the Compensation Culture, said the number of personal injury claims received by insurers rose 72% between 2002 and 2010, and that people got more compensation, typically an extra £289, quicker if they dealt with an insurer rather than a lawyer.

It blamed the “have a go compensation culture” for rising motor insurance premiums and said the NHS paid out more than £257m in lawyers’ fees as a result of claims in 2010/2011. Fraudulent and exaggerated whiplash claims can easily be made, it said, while excessive legal costs sometimes exceed the level of damages. It adds that there is no financial incentive for claimants to ensure costs are reasonable, and referral fees increase costs without adding value.

In response Andrew Dismore, co-ordinator of the Access to Justice Action Group (AJAG) said: “Cases only go to court when the insurers deny liability or refuse to pay adequate compensation. The insurers have only themselves to blame for legal costs: if they accept liability and make early reasonable offers, then the costs are contained. The ABI is in overdrive in its well financed campaign to blame the public, lawyers, and the government for rises in insurance premiums: everyone but themselves. While the ABI routinely alleges fraud, the proven number of cases is comparatively small...and there is the other side of the coin, when insurers allege spurious or fraudulent defences to deny claimants rightful compensation. Although they complain about the impact of claims, the liability insurers have not indicated by how much they would reduce premiums, or even that premiums would be reduced at all, if the changes they demand are implemented. Indeed, there is evidence that premiums may actually increase.”

Des Hudson, the Law Society’s chief executive, said the ABI report was self-serving to the insurance industry. “Lawyers exist to ensure that people get their just compensation and are not manipulated by the insurance industry. Does anyone seriously believe that insurers would pay out claims unnecessarily?”