MPs on the transport select committee are launching an inquiry into whiplash claims, chairman Louise Ellman revealed yesterday.
At the Association of British Insurers’ (ABI) motor claims conference in London, solicitors and claims management companies were also accused of taking part in a “feeding frenzy” ahead of referral fees being banned.
Ms Ellman told the conference’s opening plenary that her instinct was that “a lot of whiplash claims” are fraudulent” – encouraged by cold calling – but that there are “genuine claims in there too” which must not be lost in the rush to tackle fraud.
The committee will be issuing a call for evidence on the nature of whiplash claims, how many are fabricated, views on the government’s proposals to tackle the issue, access to justice and “other ways to bring down costs”, she said. It has already conducted an influential inquiry into the cost of motor insurance.
John O’Roarke, managing director of general insurance at LV=, told the same session that his company had seen a 50% increase in claims being reported later than usual for genuine claims. “[It] represents a feeding frenzy by solicitors and claims management companies to make the most of the situation before 1 April, when referral fees are banned,” he said.
He estimated that 50% of whiplash claims are fraudulent, asking how in some parts of the country only 20% of accidents lead to claims, whereas in others it is 60%. The difference was “not credible”, he insisted.
Mr O’Roarke defended LV= charging referral fees, saying it did so because it did not want to be “competitively disadvantaged”, and also because it did not want to pass more money onto the claimant community; this would prevent solicitors buying “another house in Barbados”.
Leading defendant solicitor Andrew Parker, head of strategic litigation at DAC Beachcroft, argued that claimant solicitors “have had a good run”, observing that “several have sold their businesses for millions of pounds”.
Craig Budsworth, chairman of the Motor Accident Solicitors Society, was charged with giving the claimant side to the debate, and pointed to ABI estimates that only about 7% of cases are fraudulent.
He asked how soon it will be before insurance premiums start to fall: “As a sector you’ve all made public statements and private commitments to the Prime Minister and other ministers. We are going to get to the point very soon where the focus is going to shift away from what is going to be left of the legal sector.
“You will be held accountable for your promises – not just the government and Parliament, but by the consumer. You, the British insurance industry, will have to deliver on those commitments.”
However, Mr O’Roarke indicated that there was unlikely to be much change. The £1m a day that the insurance industry estimates will be saved from cutting the RTA portal fee represents a 3% reduction, he said, but as premiums have already fallen 12% in recent times, “I’m not hopeful of much more”.
Further, the cuts to claimant costs were balanced by a 9% increase in the latest edition of the Guidelines for the Assessment of General Damages, and by Lord Justice Jackson’s 10% increase in general damages, he said.
Mr Budsworth also urged insurers to share their fraud data with claimant lawyers – “we won’t stamp it out if we don’t speak,” he said – and called on them to stop making pre-medical offers, a practice he said “stinks” and drives poor behaviour.