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Whiplash debate sees PI sector demand cap on insurers’ market spend in House Of Commons

Part of the House of Commons

The opening day of the House of Commons’ Transport Committee’s inquiry into whiplash saw fireworks as personal injury lawyers hit back with demands of their own to limit the amount of marketing spend the insurance industry has in order to, as they put it, ensure that savings made from the Jackson reforms are properly reflected in lower car insurance premiums.

With the focus from the personal injury sector being largely on the threat to increase the small claims limit, a lot is riding on the outcome of the whiplash inquiry especially as last month the Government announced that it would delay their proposals on whiplash reform until after the committee had submitted their report.

The main concern as emphasised by Scott Rees Partner and Merseyside Co-ordinator for the Motor Accident Solicitors Society (MASS), David Byrne is the motivation for the increase. He said: “Claimants will be forced to act in person; insurers will have to instruct solicitors as they cannot appear in their own right, so there is an obvious imbalance there. The effect will be that either the courts will be clogged up with litigants in person, or insurers will use their advantage to bounce claimants into either settling prematurely or giving up.”

“The small claims limit is not about reducing costs, reducing fraud etc, it is a direct attack on peoples access to justice. Personal injury claims worth £5,000 are not simple and it is not realistic to suggest that a client can deal with it without legal representation.”

Representing the legal sector in the House of Commons was Desmond Hudson, chief executive of The Law Society, Matthew Stockwell, chairman of the Association of Personal Injury Lawyers (APIL), Andrew Ritchie QC, head of chambers at 9 Gough Square and the vice chairman of the Personal Injury Bar Association, and Craig Budsworth, chairman of MASS.

Mr Hudson broached the subject of referral fees, claiming that they were an unacceptable cost to consumers. He said: “I suspect insurance companies are receiving referral fees from car insurers, from the sellers of parts to car repairers, from the sellers of paint to car repairers, and I think what we need is a very transparent understanding of just where all these flows of money are coming from.”

Of course you would only have to have watched the Channel 4 Dispatches programme to learn more of the extent of how insurers operate referral fee schemes with various part and paint providers to realise that all is not right with the conduct of the insurance industry.

He also presented figures that contested the opinion that the UK is ‘the whiplash capital of the world’. The figures he presented to the Commons showed that the total motor claims spending by UK insurance in 2011 was at 14% compared with Germany’s 20% and France’s 13% which Mr Hudson described as a normal market share.

Representing the insurance industry yesterday was James Dalton, Head of Motor and Liability at the Association of British Insurers (ABI), Dominic Claydon, Director of claims at Aviva UK and David Fisher, AXA Insurance’s catastrophic and injury claims technical manager.

Mr Dalton was quick to dismiss the claims from the personal injury sector that the insurer’s third-party dealings with claimants are leading to under-settlement. He told the Commons: “I do not think there is evidence that the insurance industry is under compensating direct claimants.”

This was a point that Dominic Clayden agreed with, and he went on to accuse lawyers of ‘peddling’ this without justification.

The argument from the personal injury sector is that insurance companies are not regulated for third party claimants whereas solicitors are. It is the solicitor’s duty to provide a duty to act in the claimants’ best interests.

The insurance industry is regulated by the Financial Services Authority (FSA) but, although they have a duty to consistently deliver fair outcomes to their customers under the Treating Customers Fairly Scheme; this does not apply to third party claimants, which is where the concern had risen from.

The House of Commons debate continues today and there are a whole host of questions that the personal injury industry wants answers for in the event that the proposed whiplash reforms are implemented.

Image source(s)

1. Wikipedia; United States Government Work; https://en.wikipedia.org/wiki/Palace_of_Westminster#/media/File:Secretary_Kerry_in_House_of_Commons_Chamber.jpg

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