UK Panel Seeks to Reign in Whiplash Claims; ABI, RSA Comment

By | January 13, 2012

A report from the UK Government’s Transport Select Committee targets the voraciously expanding number of claims for “whiplash,” i.e. soft tissue injuries, as badly in need of reforms.

These types of injuries now account for around 70 percent of all UK auto accident claims [around 554,000 in 2101-11], despite, as the TSC pointed out, a 23 percent decline in road accidents.

The government’s response is a call for enacting stricter evidentiary requirements to substantiate injuries and losses from claims, as well as limiting, or doing away with the widespread use of referral fees, which, as the UK’s insurers have frequently said, encourages litigation.

The industry has been quick to support the government’s proposals. Nick Starling, Director of General Insurance at the Association of British Insures (ABI) stated: “We are pleased that the Transport Select Committee has recognized that spiraling personal injury claims are the real reason car insurance premiums have been increasing and made recommendations for meaningful reform. It is absolutely critical that Britain’s whiplash epidemic is tackled once and for all and the Select Committee’s acknowledgment that the bar to receiving compensation for whiplash is too low is a step in the right direction.

“The Committee is also right that the fees lawyers receive need to be reviewed as they currently add unnecessary cost.”

He also stressed that the UK’s “insurers are determined to deliver value for money motor insurance. “Our customers,” he indicated, “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.”

As far as referral fees are concerned, Starling said the ABI is “baffled” by the TSC’s apparent call to simply make them more transparent. “Referral fees should be banned altogether and not made more transparent – and that ban should apply to all organizations receiving them, not just insurers,” he stressed. “Banning referral fees and, crucially, reducing legal costs, will improve the situation for customers.”

RSA also supported the TSC’s report. Chief Executive for the UK & Western Europe Adrian Brown described personal injury claims as the “root cause of rising insurance premiums.”

He called for “a wider root and branch review of the structure of personal injury legal fees and payments for soft tissue injuries. We would urge the Committee to ensure any whiplash reforms go far enough to address the volume of claims and the burden of proof.”

In addition Brown’s view on referral fees echoes the ABI’s. He stated: “Further transparency with regard to referral fees will do nothing to address customer’s concerns or improve their premiums. In fact without an outright ban across the board for all parties, accompanied by a proportionate reduction in the cost of credit hire, nothing will change. We are disappointed that the Committee seems to have targeted their criticism at insurers rather than tackle the dysfunctional nature of the system, which has driven the increase in premiums.”

Sources: Transport Select Committee Report, Association of British Insurers, RSA.

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