AA Urges Government To Kill Off Compensation Culture

AA Insurance has welcomed the report by the Transport Committee, published today (Thursday 12 January), following its inquiry into the cost of car insurance.

Simon Douglas, director of AA Insurance brokers, comments: "We must kill the compensation culture that has sharply driven up car insurance premiums. The recommendations from the Transport Committee are a positive step towards doing that."

The broker welcomes the Committee's confirmation that the sharp increases recorded over the past two years have largely been driven by personal injury claims.

Simon Douglas points out that the AA's benchmark British Insurance Premium Index recorded an annual premium increases as high as 40% in April 2011.* Premiums have since started to level off.**

However, the Transport Committee notes that the number of personal injury claims continues to rise despite a sharp fall in the number of collisions on Britain's roads; and that about 70% of personal injury claims are for whiplash injury.

"We have long been concerned that the proliferation of personal injury and accident management firms has encouraged people involved in a no-fault accident to make personal injury claims or even fraudulently stage collisions in order to make such claims.

"A claims culture has developed to the extent that it has become accepted that if another vehicle hits your car, you should make an injury claim. That's regardless of how serious the injury is, or even if no injury has actually been suffered. The Transport Committee has clearly recognised that this has driven up premiums for
everyone.

"Of course, those who are injured in crashes should gain access to justice and compensation for their injury. But too many people are claiming for minor whiplash that is almost impossible to clinically prove.

"The majority of drivers don't make injury claims yet they are paying the price of those who do. I hope the Committee's recommendations are taken on by the Government."

Mr Douglas says that in the past, insurers often recognised claims that were false but the cost of contesting them in court usually cost considerably more than the injury compensation claimed.

"But the insurance industry is investing heavily in fraud detection and successfully contesting false injury claims. Formation of the new police Insurance Fraud Unit this month, which is one result of the earlier stages of the Transport Committee's inquiry, will also go a long way to help bring fraudsters to book," he says.

Mr Douglas said that the MPs' call on the Government to impose a higher threshold for the payment of compensation in whiplash cases should be welcomed.

Case studies

Mr Douglas points to two AA Insurance cases that illustrate how fraudulent personal injury claims can lead to premium increases.

Injury claims from 'passengers' in an empty parked car

An AA Insurance customer reversed into a space in a narrow street to allow an oncoming lorry to pass. In the process, she lightly clipped a parked car outside a shop. She sought the owner of the car who was inside the shop and details for the minor damage caused exchanged. The customer's insurance company subsequently
received a claim for £12,600 compensation for whiplash injuries suffered by 'three  people' in the car.

"This outrageous claim was successfully repudiated. But it underlines the willingness of individuals to make money from even the most minor collisions, encouraged by accident management firms who themselves gain significant fees from such claims," Mr Douglas says.

Uninjured driver encouraged to claim

In another case, a customer's car was undriveable following a low-speed collision that damaged the front wheel of his car. He was not injured and reported the accident to his insurer at the scene, declining a temporary replacement vehicle as he could work from home or use his partner's car until his own was repaired. The damaged car was collected by a recovery firm and taken to a garage. Shortly afterwards he received calls from an accident management firm and a personal injury lawyer encouraging him to accept a 'better loan car than his own for as long he needed it' and to make a claim for whiplash injury that he did not suffer.

"At first he thought the calls were from his insurer but it later transpired that the recovery company had sold his contact details on to these firms without his knowledge. If he had accepted this encouragement the cost of the claim could have more than doubled," Mr Douglas notes.

* AA British Insurance Premium Index, April 2011, showed that according to the Shoparound index (average of the cheapest three premiums from a range of insurers for each in a nationwide basket of risks), premiums rose 40.1% over the 12 months ending 31 March

** The AA British Insurance Premium Index for Q4 2011 will be released later this month and is expected to show that premiums rose by about 15% over the 12 months ending 31 December 2011

(Photo: In case you are wondering, the photo is from a video of the 2011 Ford Focus, demonstrating its collision alert system that stopped the car running me over. Video here: 2011 Focus video)