There are an estimated 550,000 whiplash claims made each year, many of them for amounts less than £5,000. Yet for each £1 paid out in compensation the insurance industry (at least Aviva) claims that another 82p has to be found to meet the costs of middlemen lawyers and claims handlers.
Such is the scale of this ‘industry’ that an average of £118 a year is piled onto to each motoring policy to pay for it.
Now Aviva wants to cut out the middleman and see a change in the law that would mean drivers seeking compensation have to go straight to the insurer of the at-fault driver.
Aviva says that all motorists benefit because of lower premiums. It also insists – going by current experience – that the size of payout for a legitimate claim would be the same, perhaps slightly higher, than one obtained by the help of independent lawyers. What they didn’t quite answer when I spoke to Aviva was whether the overall number of payouts would fall because either drivers were put off going straight to an insurance company (also, Aviva couldn’t completely explain how the process might work – would it literally involve an injured party themselves writing to the at-fault driver’s insurer?) or because they lack the legal knowledge to ask for what they are entitled to.
A second strand of Aviva’s plan involves the establishment of an independent medical panel to check the validity of claimants’ cases. This will draw some sympathy from drivers who have been victims themselves of what the ABI calls the “fraud of choice” for too many people.
The risk of this approach is that another layer of cost and bureaucracy will replace the one that Aviva is looking to remove.
But for any driver struggling to meet the high cost of motoring – not least insurance – these proposals should be discussed. Though one wonders if this is such a good idea why it hasn’t been suggested before?
What Aviva and the other insurers won’t do is produce data to justify what they say.
The truth is that insurance companies are only too pleased to create any kind of smokescreen to hide the fact that the premiums are too low (ie the money received doesn’t cover their liabilities adequately) and how they progress claims is appalling.
The ABI will repeat the myth of compensation culture before Tory MPs, having previously accepted under Labour Government that compensation culture was a myth. Anyone who understands teh claims process and the funding system realsies that ONLY those cases which are nailed on certainties are pursued by Solicitors under CFA agreements (because no win means no fee).
Originally insurers whinged about claimants having access to legal aid, so it was got rid of; then they whinged about CMCs, so they were regulated; the latest is to whinge about CFA’s and having to pay costs when the case goes to Court, so the Government has reduced costs to the point where profitability of PI firms is a real issue (Aviva may get what it wants through insolvency) and is considering raising the small claims limit, again so as to appease the insurance industry.
Instead of insurance premiums reflecting the exposure to risk, insurance premiums are driven by market conditions and competition and are set unrealistically low. Therefore insurance companies wish to skew the market to suit their reality.