The insurers PR machines seem to have been in overdrive recently. Barely a day goes by without mention of "the compensation culture", "the spiraling cost of claims" and the payment of referral fees to Claims Management Companies who, it is said, have no place in assisting injured victims seek and obtain appropriate and valid advice from solicitors. The insurers have had it their own way for too long but maybe the tide is finally turning?
Jack Straw recently lambasted the insurers for their "huge racket" of receiving referral fee payments in return for passing on details of injured customers. Whilst this highlighted the fact that the insurers are complicit in the number of claims being generated, it tells only half of the story. The large majority of personal injury claims (particularly motor accident claims) are not funded under a Conditional fee Agreement (2no-win, no-fee") but are funded by Before The Event legal expense insurance.
It is a fact that the BTE insurers have been receiving large referral fee payments from their "panel solicitors" for many years although this fact is rarely mentioned. It is commonplace for an injured motorist to report an accident to their motor insurer and then be called within minutes by a "panel solicitor" enquiring about their injuries and those of any passengers. Compensation recovery Unit statistics do show an increase in motor claims and the BTE insurers would appear to have played their part!
Fraud is often raised as a major concern, as it right should be. Rather than ignore this or encourage this, reputable solicitors do much to counter this. The industry is heavily regulated and many firms aspire to industry standard accreditation such as Lexcel. Frivolous claims are routinely rejected by solicitors. It is senseless acting for the client unless satisfied as to the credibility of the client and the validity of the claim – one could argue even more so under the terms of a CFA where the solicitor will not receive payment unless the claim succeeds.
It is often suggested that fraud is more prevalent in motor claims. Is it a coincidence that changes brought about, mainly at the behest of the insurers e.g. the ability to obtain a motor policy on-line (reducing cost to the insurer) and the MOJ claims process are, in the main, restricted to motor claims? Fraud does not seem to arise as often in claims involving work accidents, where the insurance broker stills plays an important role in the obtaining of the insurance policy, the identity of the insured can be rigorously checked and where the claim process still enables a more thorough examination.
The excessive legal cost of claims is often cited by insurers and grabs the easy headlines. Is this really the case and, if so, can this be attributed solely to the claimant’s solicitors? Motor accident costs for the typical claim have been fixed since 2002 and have not increased, even with the introduction of the MOJ process. Why is it that insurers continue to fail to admit liability at an early stage and will often make low offers, quite often some considerable way below levels taken the Judicial Board Studies Guidelines? Faced with such a response, a party that has suffered personal injury and financial loss as a consequence of another’s negligence has little option other than to go to the Courts to obtain fair and reasonable compensation. Much of the cost could be avoided by insurers with an early admission and reasonable offer.
William Safire (an American writer) said "never assume the obvious is true" but perhaps the words of a more famous American, Benjamin Franklin, should be heeded. He said "Half a truth is often a great lie". Don’t believe all that the insurers tell you just because they shout the loudest!
For further information on this article please contact Mike Sutton, Senior Litigation Practitioner at Sydney Mitchell on 0121 698 2200 or email m.sutton@sydneymitchell.co.uk.
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