Insurance firms "guilty of double standards"

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Insurance firms "guilty of double standards"

14th March 2011

A leading personal injury expert has welcomed the findings of a cross party select committee into the conduct of insurance companies involved in motor insurance.

MPs criticised insurance firms for allegedly encouraging clients who have been involved in road traffic collisions to pursue personal injury claims, after the House of Commons cross party Transport Committee called on the insurance industry to take steps to introduce more transparency in the motor claims arena.

Kieran Maguire, senior partner of Fentons Solicitors LLP, said: "We often hear from the insurance industry that the rise in premiums is down to avaricious and fraudulent claimants pursuing litigation. It must come as a shock to many to discover the insurance industry is actively encouraging much litigation and profiting enormously by selling on claims.

"The sale of claims by insurance companies should be banned, as should the referral of injury victims to firms with links to those self same insurers," he said. "The regulators have ignored conflicts of interest within the insurance industry for far too long. The fuelling of litigation by the insurance industry gives the lie to the idea that litigation is fuelled by claimant lawyers."

The Transport Committee has called on the insurance industry to reduce confusion with regard to 'referral fees,' whereby insurance firms are paid the fees for giving some lawyers the names of individuals involved in road traffic collisions so that victims can then be persuaded to sue for compensation.

Echoing the views of Louise Ellman, chair of the Transport Committee, Kieran said: "Consumers are largely unaware of just how much money moves around the insurance industry in this way when they make a claim. They have a right to see where their money is going. If insurance companies cannot agree a method by which to improve transparency around referral fees, then the government should step in, with legislation if necessary."

The Association of British Insurers (ABI) insists that the main force behind recent increases in motor insurance premiums is the ever-increasing number of personal injury claims and spiralling legal costs, blaming personal injury lawyers and raising the spectre of 'compensation culture.'

"The ABI is conveniently forgetting how commonplace it has now become for insurance companies to offer legal advice or legal expenses insurance (LEI) as part of a policy as an 'optional extra'," said Kieran. "Not only does this inevitably increase the cost of the insurance package to the motorist but it allows insurers to profit by selling to the highest bidder any claims arising from the policy.

"Many people who have purchased LEI aren't aware that it is really a method for insurance companies to generate profits by selling on potential claims. Furthermore, it is important that the consumer realises that all too often they are handing the insurer the opportunity to appoint lawyers on their behalf should they be involved in an accident. The potential for conflicts of interest is huge."

MPs were told that the number of these claims has not only risen significantly in the past few years but now far outstrips the number of accidents. They were further informed that more than 40% of personal injury lawyers are currently paying insurers to receive the details of customers involved in accidents with fees ranging from £200 to £1,000 for each referral.

"This is yet another example of the double standards practised by so many in the insurance industry," said Kieran. "Complaining about the compensation culture on one hand, whilst happily farming out personal injury claims for profit - to whichever firm can pay the most, regardless of their suitability, expertise or experience - on the other.

"It is ironic that the insurance industry continues to draw attention to a so-called compensation culture, bemoaning the number of personal injury claims each year and blaming the escalating costs of insurance on the legal industry when they themselves are guilty of fuelling much of the litigation and of increasing the costs of litigation."

How can Fentons help?
Fentons has a specialist department experienced in handling claims relating to road traffic accidents. If you think that you have a case or require further information, contact Fentons on 0800 019 1297 or fill in the online claims questionnaire.

Read more at - BBC