Fraudulent Claims: Insurers told to "get their house in order"

According to the Association of British Insurers (the “ABI”), just under 477,000 whiplash claims were recorded in 2012/13 despite an improvement in the safety of Britain’s roads; costing insurers over £2 billion a year and motorists £90 in additional premium.

Fraudulent motor insurance claims can manifest in various ways including: so called “cash for crash” claims; phantom passenger claims; fabricated symptoms; and exaggeration of the symptoms of a genuine injury or the impact of that injury.

The Transport Select Committee’s report suggests that:

• Insurers “get their house in order”. The Committee criticised insurers for accepting claims without proper enquiry, including failing to request medical evidence to support the claim, and for ignoring previous recommendations for transparency in insurers’ links with claims management companies.
• The Government review the collection of data concerning road traffic accidents to improve the detection of fraudulent claims and road safety on accident black spots.
• There should be an accreditation scheme for medical practitioners providing support for whiplash claims with random audits being conducted each year to improve standards.
• An increase in the small claims track limit from £1,000 to £5,000 could impair access to justice and prove counterproductive in combating fraud. To avoid this risk, the use of medical evidence in the small claims track and ways in which litigants in person could be assisted to avoid any inequality should be considered.
• The Government consider a reduction in the limitation period for whiplash claims from 1 to 3 years.

The ABI has responded, recognising the need to combat fraud but calling on the Government to deliver key reforms to the compensation system rather than facilitating further debate. Their view is that “The ball is now in Ministers’ court to make a decision on how to proceed on whiplash reform”.

Comment

Rightly or wrongly, there is a prevalent view that the increase in claimant lawyers and claims management companies, and a growing "claims culture", has made insurers "fair game" and this in turn encourages fraudulent and exaggerated claims. With referral fees paid by claimant lawyers and claims management companies to insurers being banned since April 2013, a small step has been taken in the fight against the compensation culture but, undoubtedly, there is more that can and should be done to improve the claims process, identify fraudulent claims and enable insurers to fight such claims without it ultimately costing more than paying the claim itself.

With the English and Scottish Law Commissions also consulting on fraudulent claims, the future may finally see change afoot but it is unlikely to be any time soon.