Personal injury (PI) claimants should be legally obliged to contact the ‘at fault’ insurer directly rather than going through solicitors and claims management companies (CMCs), Aviva demanded today.
In a major escalation of the rhetoric and lobbying over whiplash reform, the insurance giant said this would strip £1.5bn of “excess cost” from motor insurance premiums by halving the current cost of handling whiplash claims.
“This cost reduction could lead to premium falls of around £60 a year for the average driver,” it said, arguing that the value solicitors can offer motorists with minor PI claims is “questionable” (92% of Aviva’s PI claims settled during 2012 involved a lawyer).
Claimant lawyers hit back, saying Aviva had identified some of the problems, but come to the wrong solutions.
Aviva’s report, Road to reform: Reducing motor premiums by reforming the personal injury claims process, strongly backs the proposals in the government’s whiplash consultation, which closes next month, to raise the small claims limit for PI to £5,000 and introduce independent medical panels.
Aviva said its figures showed that there is no difference in the compensation awarded to the injured party if handled directly or via third parties, although a supporting opinion poll of 2,437 motorists found that 51% believed using a lawyer would result in more compensation than dealing directly with an insurer. Some 40% of the 383 drivers who had made a PI claim felt that third-party services would offer easier 0B0-103  access to legal advice – Aviva said legal expenses insurance in motor polices made this unnecessary.
The company outlined the “excessive cost of challenging a whiplash claim in court”, saying its average was £11,500 against £5,500 for simply paying out on the same case at once.
While Aviva largely blamed solicitors and CMCs for encouraging people to make claims, its own survey showed that of those drivers who were encouraged or advised to make their claim, this was mainly by friends and family (58%) – a CMC or PI lawyer came in at 13% and a ‘no win, no fee’ advert was cited by 9% of respondents.
Claims director Dominic Clayden said: “Our primary concerns are that injured parties receive care and compensation as quickly as possible and that all motorists benefit from a reduction in the excessive costs that have built up in claims over the past few years. We are campaigning for a more efficient system that removes the ‘interested parties’ and requires people to deal directly with the insurer of the at-fault party.”
On medical panels, Aviva said there should be a greater focus upon targeted rehabilitation rather than compensation that many of those surveyed thought was sought to spend on whatever claimants chose.
Of the 383 respondents who had actually made a claim, only 33% spent their compensation on medical treatment or physiotherapy, others said it was used to pay off household debt (29%), to buy luxury items such as TVs (12%) or to go on holiday (9%). Other uses admitted to include buying a car, putting it into savings and paying for university.
The poll identified a “strong link” between rising PI claims and rising premiums, with 95% saying unnecessary claims are behind premium increases. It found strong support for an end to cash compensation for minor motor accidents where no-one was injured – there should simply be the insurance cover for the cost of repairing the vehicle – and a preference for care above cash. Around two-thirds backed a ban on “excessive legal fees” and the unnecessary involvement of lawyers or CMCs.
There was overwhelming support for tighter regulation on how CMCs and solicitors market their services.
Craig Budsworth, chairman of the Motor Accident Solicitors Society (MASS), responded: “Aviva has identified parts of the problem but not come to the right solution. Claimants must have access to independent legal advice.”
He said MASS agreed with many of the issues and findings highlighted by Aviva: “Premiums are too high and fraudulent whiplash claims are having a negative impact on hard hit motorists. [But] we must not forget the needs and rights of the innocent accident victims. The Association of British Insurers estimates that 7% of claims are fraudulent. It is vital that whatever reforms may be made to the system, the 93% of innocent claimants are not prevented from seeking justice and compensation for their injuries.
“There is opportunity for fraud in the system and MASS agrees with Aviva that CMCs must be more heavily regulated and also that no claimant should receive any compensation without a fully independent medical – no medical, no damages.”