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Russell Thomson from The Injury Lawyers explains how insurance companies are driving compensation culture for whiplash claims in a bid to chase referral fees. More from the injury lawyers injury claims website: The?Injury Lawyers.
Whiplash claims, whiplash compensation, whiplash injuries – or Whiplash Cash, Whiplash Epidemic, and “the weakest necks in Britain” as the press often title it; whiplash has not escaped the news over the last decade as compensation claims continue to rise together with our car insurance premiums as well.
It’s obvious to anyone that it’s all getting way out of hand!
But what’s the reality behind all this? What can we do to solve the problem? We often hear in the news from the insurance companies complaining about higher volumes of claims causing premiums to rise. We absolutely love a good scandal here in the UK – making one out of whiplash is just way too easy to do.
So, why are the government wanting to crack down so hard on whiplash? Are we facing a real compensation culture? And what should be done about whiplash claims to solve the problem?
Let’s Face Facts – It’s a Hard Knock Economy…
As an economist by education, it’s easy for me to try and look at the bigger picture in these tight financial times. Let’s face it – we can’t afford to be paying out huge premiums for insurance. It makes anyone angry to think their premiums are going up and up; it makes me personally angry knowing I have to pay more and more! The insurers have been quick to answer our concerns – “the surge in whiplash claims is increasing everyone’s premiums!!!” All of our purse strings are as tight as we can pull them at the moment.
Naturally, the government want to do something about it. To be able to say to the people “we will take this whiplash problem seriously and do something about it to save all your premiums being too high” is a powerful political tool. We, the British people, like I said earlier, love a good a scandal; and generally like to have a good dig out our government whilst we’re at it! When they turn round and tell us they can save us some cash by solving what seems to be a huge problem in our society today, we’re quick to lap it up and prepare our ballot choices for the next election.
We call it “the compensation culture”. It’s a great catch phrase, isn’t it? But to really understand a problem, we have to delve a little deeper and try to understand what the underlying issues really are…
The Compensation Culture Explained
If you have read the government reports surrounding the Compensation Culture, namely the Lord Young and Lord Jackson reports, then you may well know what I’m going to say next. Amazingly, there is no such thing as a compensation culture! It’s actually a media fuelled myth that was formed in the wake of the whole whiplash problem I’m writing about now, together with the whole “where there’s a blame, there’s a claim” idea! Claims are on the rise, and insurance premiums are on the rise too – that natural assumption it’s because people are claiming left right and centre is the obvious conclusion we draw.
What we should be doing is looking deeper in to the underlying issues; the real problem. The first point of call is to ask one simple question – how has this all happened? How did we get ourselves in to this predicament? Answer this one easy question, and the answer is pretty simple to see.
Why are there more people claiming? Well, it’s safe to say that more people are aware that they have the right to make a claim for compensation, and will therefore use the human right they have to claim from a policy of insurance that covers injuries to third party victims. Which is a quick point in itself – insurance is there to cover people for damages, so why shouldn’t we claim from it??
There is certainly far more advertising for whiplash claims than there used to be. Aside from the adverts on the TV and the radio, type “Whiplash” in to Google or any other search engine and see the flood of results from companies offering you their services for a compensation claim.
But there is something far more sinister at work when it comes to whiplash claims. There is something out there that is the real reason why people are making more claims, including a minority making fraudulent ones. Its two simple words that are so powerful they have the ability, when utilised in the right way, to make millions and millions for companies that involve themselves in the practice. These two simple yet powerful words are “Referral Fees”?
Referral Fees – The Real Problem
The real reason why there are so many people being pushed in to making compensation claims is because of the practice of personal injury referral fees. Whiplash claims in many instances are relatively easy to win – a rear end collision accident is basically money just waiting to be earned by the solicitor who will take it on. This salient fact has been picked up on and turned in to one of the biggest money making schemes in the last century.?
If you hold the details of a whiplash accident victim, you are potentially holding ￡1,500.00 of legal fees in your hands. ￡1,500.00 is a fair bit of money. You approach anyone in the street and say to them “would you like ￡1,500.00?” and you’ll find the majority of people would be more than happy to oblige.
You tell a law firm that you can give them ￡1,500.00 for nothing and you would have one happy law firm. You tell them you can give them ￡1,500.00 in exchange for ￡800.00 and you still have a happy law firm. Can you see where I’m going with this?
The personal details of an accident victim who was not at fault in an incident is worth potentially a lot of money. Insurance companies, garages, breakdown and recovery firms, and the scrupulous claim and accident management companies have all clocked on to this; and they’re all making millions of pounds from it.
The most common one is Legal Expenses Insurance, or Motor Legal Protection as it’s sometimes called. The vast majority of people with a motor insurance policy will probably have this as an added extra, or will be physically paying for it as an addition to their insurance policy. Your insurance company will tell you that this vital addition to your policy means you have the benefit of legal insurance for a claim for compensation should you ever be in an accident.
Now, don’t get me wrong, it is a form of insurance; but when your insurers pass your details over to one of their panel of approved lawyers under the insurance scheme, they receive a healthy referral fee or administration fee for their troubles. Amazingly, this can be in the region of ￡800.00 to ￡1,000.00.
So, to break it down in extremely simple terms, if you have an accident and your insurers pass you over to a personal injury lawyer, your insurers could receive up to ￡1,000.00 for doing so. They are essentially “selling” your claim over to a law firm. Given that one of the first points of contact you make after an accident is to your own insurers, they can get the deal done there and then without delay; leaving the accident victim without the opportunity to even think about whether they are going to make or claim, nor who they might instruct to deal with a case.
If your insurers don’t catch it in time, the recovery firm you use may well also refer your details over to a law firm for a handsome payout instead – or the garage you take your car to, or even the police according to some sources in the past. Ultimately, anyone who knows about your accident can simply refer your details over to a claims company or a law firm and they can swoop your claim within hours or days.
I bought a new car and received a free “Accident Assistance” pack which basically told me to call this one helpline number if I am ever in an accident. Why? Because they will know right away if I have a claim and will be able to refer the case over to a lawyer for cold hard cash! You really can’t escape this nowadays; and you probably don’t even know it.
Now, let’s say for arguments sake this practice doesn’t exist. If it didn’t, the amount of people who would not even consider making a claim would be huge. Many wouldn’t even think about it at all! So it’s safe to say that the increase in claims is actually down to the fact that insurers and anyone else involved in the road accident process are pushing people in to claims when they may well have never even considered making a claim until they are contacted by someone telling them they could claim thousands of pounds in compensation.
Hey – we’re in a recession! Who the hell wouldn’t accept the opportunity to get thousands of pounds for a compensation claim!?
Insurers Referral Fees Exposed – The Insurers “Dirty Little Secret”
As it so happens, this was all exposed in the media last year, which for independent law firms like us who do not, and never have, paid for claims by way of referral fees, is great news! The simple fact is that not all law firms buy claims from insurers and claims companies as we don’t believe in the practice whatsoever. All our clients come to us directly for our reputation after seeking advice about whether they can make a claim for the whiplash they are suffering.
Last year former Justice Secretary Mr Jack Straw brought to light and blasted what he has termed as the “huge racket” of insurers passing on details to personal injury lawyers for extortionate fees. The reports confirm that Mr Straw has said that “the practice had driven a surge in no-win, no-fee claims this year which put up premiums – all with the insurers’ knowledge”.
So, as you can see, it’s the insurers themselves that are akin to this apparent problem.
My own insurers tried to sell me Legal Expenses Insurance as part of my policy at least four times when I switched over to them. The lady simply persisted and persisted, putting me on hold several times whilst she, I assume, was telling her supervisor she was having difficulty selling it to me. In the end I told her outright “it’s my job to stop it; I work for an independent personal injury law firm and know all about the referral fee scams!” Her response in all honesty was classic – “oh… erm, never mind then…”
They did try again when I renewed. I got a call from a pleasant sounding young man asking if Id received my new policy documents through the post, before he quickly said “oh I’ve just noticed you don’t have legal protection on your policy, which is quite a problem for people if you have an accident”. It was 9:30am in the morning and I didn’t have the patience when I told him “the real problem is insurers selling peoples details to law firms for cash; I work for a law firm, so I think I’ll do without it thanks.”
It seems we are facing situations were insurers are so desperate to sell details to lawyers for claims, we are facing potentially fraudulent claims from pushy insurance companies. Whilst whiplash is a real and difficult injury to live with (I know, I’ve still got mine!), people are being pushed in to wrongfully cashing in on it.
Investigations from Mr Straw brought him to the Association of British Insurers, and two of the UK’s largest insurance companies, whom admitted to selling on their own customers personal details to solicitors for profit.
“I went to see the Association of British Insurers (ABI), and senior executives of two of Britain’s largest motor insurers,” Straw wrote in The Times.
“I asked them. A long pause, a look of embarrassment, then one of these executives said: ‘This is the industry’s dirty secret. It’s we, the insurance companies, who sell on this personal information.’?
“It is gobsmacking,” Straw said. “The insurers are complicit in something that is against their interests. In my view, what they are doing, in principle, is contrary to the spirit of data protection.”
The above, I believe, pretty much says it all.
Referral Fees to be Banned – Problem Solved?
Both the Law Society and the Bar Council have recommended in the past that referral fees be stopped on the grounds that they have the potential to limit access to justice and reduce the quality of legal services on offer.
Following news of the pending ban, Justice Minister Jonathan Djanogly has also spoken out and confirmed “It’s certainly a racket. It’s a sick culture that we have to turn round.” The bill has been passed through government, and it is now just a matter of time before they are banned outright. This could help to solve the problem by reducing the amount of claims as people will not be pushed in to making a claim by insurers and companies looking to make a quick buck from selling their claim to a law firm.
Chairman of the Bar, Peter Lodder QC, has also spoken out, saying that referral fees have “no place in a fair and open justice system… They are bribes and add an unnecessary cost to litigation.”
Are you saying that the insurers are actually to blame for the surge in increased claims and premium rises then?
Yes. I am. I told you that whiplash claims and the rising compensation culture would be fully exposed. But what has been exposed is probably not quite what you expected to hear. Just look at the facts we have before us, and you tell me who is really to blame for all of this…
Category: Insurance Blog, Insurance News, Legal News
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