There has been a lot of talk over the last few years about the ‘compensation culture’ which has come to define any discourse on personal injury claims in the UK. One area that has received particular attention is car accident claims.
In the last few years insurance claims have risen way above the rate of inflation. What makes it worse is that the number of accidents on the UK roads is actually being slowly reduced!
There are many reasons for these rises. The OFT (Office of Fair Trading) have recently expressed their concern over the shady practices that some claims companies and insurance companies use to generate more claimants and inflate profits. Practices such as referral fees and exclusive arrangements with car hire companies are thought to add £225 million per year to our insurance premiums.
As a result of the concerns raised by the OFT, the competition commission is set to produce a report which will make recommendations on how these practices can be eradicated.
Is This the Answer?
Though this is clearly one part of the problem, many commentators have expressed concern at the limited scope of the competition commissions aims. Though the practice of ‘cashing in’ on people’s accidents, and using professionals such as policemen and medical professionals to obtain contact details of potential claimants, is clearly wrong, there is far more to it.
Another reason for our insurance premiums increasing is the large number of illegitimate claims which are currently being made by individuals and then being settled out of court. In many cases, the current claims procedure makes it cheaper and easier for an insurance company to settle out of court than go through the normal channels. This means that many illegitimate claimants are getting large payouts, the cost of which is passed onto all of us through increased premiums.
By bypassing the channels that are set up to ensure justice, insurance companies are encouraging illegitimate claims. If people feel they will get a payout without having to go to court, some will inevitably try. So long as this is the case, our insurance premiums will simply continue to rise.