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Red Nose on Insurers?

I thought it was appropriate to raise awareness of a practice employed by defendant insurance companies which the Government now recognise as being one of the factors behind the increasing number of personal injury claims in the motor industry.

Basically, defendant insurers are realising that there is money to be made in personal injury claims and so, when one of their insured has an accident, they are now quizzing them to determine whether or not they have a valid claim for personal injury. If they do, the insurer  'sells' the claim to one of their panel solicitors who acts for the insured against another major insurer.

We understand that the price or 'referral fee' for such claims can be up to £750 so it doesn't take a genius to work out that it is quite a money spinner. Unfortunately, they are all at it which means that an insurer may make more money by selling claims but they are then having to pay out for more claims made against them!

So what do they do? Well, they blame claimant personal injury lawyers and claims management companies for driving up the number of claims. They back Lord Jackson's reforms shouting loudly of 'increasing lawyers fees' and the 'compensation culture' - basically pointing the finger at everyone bar their own industry. Problem is of course they have been rumbled. Lawyers fees per claim can't be increasing - they are fixed and Lord Young's report on the 'Compensation Culture' concluded it was a myth created by the media.

So why change anything? Why bother looking at one way costs shifting, reducing success fees or removing recoverability of After the Event insurance? Why not ban insurance companies from receiving referral fees. In one fell swoop this would remove the incentive and would in one go reduce the number of claims.

Red, er noses all round I say.

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