Insurance companies must make more effort to contest fake whiplash claims and help to cut rising premiums, according to a new Government report.
The Government’s Transport Committee, which began investigating rising premiums after accusing the insurance companies of selling on customers’ details, says motorists looking to make claims after accidents should provide more proof that their whiplash injuries are genuine.
It is also looking for the Government to ban insurers from selling on customer information, following a Parkers investigation into referral fees last year.
According to the MPs’ report around 70% of personal injury claims through car insurance arise from whiplash claims. The Committee warns that the spiraling cost of motor insurance is primarily the result of costly bad practices in the industry and, in particular, the escalation of uncontested claims for whiplash injury.
Launching the latest report, Louise Ellman, Transport Committee Chairman, said: “Insurers, solicitors and claims management companies have themselves driven up the cost of motor premiums. Although we strongly support access to justice, drivers should not be railroaded by cold callers into launching legal action. The insurance industry must abandon sharp practices that push up premiums such as passing drivers’ personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms.”
The Committee concluded that the rise in personal injury claims is the main reason for the rise in premiums.
Ellman explained: “Many of these claims are for whiplash, an injury where diagnosis is often subjective and therefore very costly for insurers to challenge. If the number such claims does not fall significantly, the Government should bring forward primary legislation to require objective evidence – both of a whiplash injury and of it having a significant effect on the claimant’s life – before compensation is paid.”
MPs also questioned the effectiveness of the Government’s recent decision to ban referral fees relating to personal injury cases.
Ellman added: “The Government should ensure that the new legislation is implemented in a manner that will prohibit insurers from receiving referral fees across the board rather than simply in relation to legal action. Greater transparency is also essential. To expose the ‘merry-go-round’, the Government must oblige insurers to provide clear information to consumers about how and where they pay referral fees.”
MPs have called for an investigation into cold-calling from law firms looking for business in personal injury claims and explore legislation to stop this practice.
At the start of 2011 the Transport Committee held an inquiry into the rising cost of motor insurance. This examined the reasons and consequences of recent increases in premium; the impact on young people of the high costs of motor insurance; the extent to which the cost of motor insurance is influenced by the prevalence of road accidents, insurance fraud, legal costs and the number of uninsured drivers. The Committee published its report on March 2011 called The Cost of Motor Insurance.
