Insurance Firms Accused of Encouraging Claims

Monday, March 14, 2011

CHESTER, England, March 15, 2011 - The car insurance industry is coming under fire after a report from the
Transport Select Committee attacked the relationship between insurance firms
and personal injury lawyers.

The report, which was presented by leading actuarial consultancy EMB,
described the "merry-go-round" of payments that occurs after car crashes,
with lawyers allegedly paying insurers and even garages for information about
people involved in car accidents.

The referral fees were cited as a major factor in the rapidly increasing
cost of insurance premiums, which is expected to rise by an average of 40 per
cent this year.

The report said: "In our view, the biggest single factor driving price
increases is the burgeoning cost of bodily injury claims.

"We estimate that twenty years ago bodily injury claims accounted for
around 20 per cent of UK motor insurance claims costs. In 2010 we now
estimate that proportion to be 50 per cent."

Steve Sweeney, a car insurance expert at
( said: "Our research shows
that car insurance premiums have increased year-on-year by a massive 31 per
cent and this is set to continue to rise.

"Factors that are causing this include an increase in personal injury
claims, fraud and the continued problem of uninsured drivers which are
pushing up premium prices. In fact, we carried out some research in August
last year which found that 15 per cent of motorists under the age of 35 would
consider staging a motor accident to claim on their insurance.

"Organised motor fraud not only costs the insurance industry, but risks
the safety of innocent drivers, passengers and pedestrians. In addition,
fraudulent claims cause insurers to increase premiums for honest motorists as
they try to recuperate their losses, making it even harder for cash-strapped
motorists to keep their cars on the road."

Safer roads

The rising cost of insurance is a bitter pill to swallow for the UK's
drivers, who have made the country's roads safer over the last 20 years.
Figures from the Department of Transport show that the number of people
killed or injured on Britain's roads has dropped from 341,592 in 1989 to
222,146 in 2009.

Duncan Anderson, a fellow of the Institute and Faculty of Actuaries,
pointed a finger at Accident Management Companies, whose role is to provide
drivers involved in accidents with vehicle repair services, replacement car
higher and lawyers if necessary.

He said: "We have seen a correlation between claim frequency between
these companies and bodily injury claims," said Duncan Anderson, a fellow of
the Institute.

"The mystery is that the number of accidents is going down, but more
people are claiming that they have been injured.

"There is anecdotal evidence of people taking a car in for a repair and
getting a text message as they leave the garage asking them if they were in
an accident."

No win, no fee

The "no-win, no-fee" promises made by personal injury lawyers are driving
up the number of personal injury claims being made and the compensation
culture that has grown has also led to a disturbing rise in the number of
"staged accidents" occurring around the UK.

Chairman of the Transport Select Committee, Louise Ellman, said: "Wider
access to justice is to be welcomed, but it has come at a significant cost,
with far more personal injury claims being made than in the past.

"The police made plain to the committee that 'staged accidents' are on
the increase and that, so far, we have been lucky there have been no
fatalities resulting from such incidents.

"That luck may run out unless the insurance industry acts rapidly to help
the police target this kind of fraud."

The Committee called for a special police unit to be established to
tackle the problem, paid for by insurance firms.

Simon Douglas, the director of AA insurance, welcomed this idea.

He told the BBC: "With insurer control, such a unit could very quickly
pay for itself. Fraud, particularly false personal injury claims, is in my
view the biggest driver of premium increases."

Nicola Parry,,,

Nicola Parry,, nicola.parry at, +44(0)1244-370-318

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