MPs Say Insurance Firms Encourage Injury Claims

According to a BBC report, British MPs have criticized the nation’s insurance firms for allegedly encouraging injury claims after accidents. A study from the Transport Select Committee reveals how firms are getting paid “referral” fees for giving lawyers the names of people involved in crashes. As a result, these people are often encouraged to sue for compensation.

As a response, the insurers' association instead blamed the "compensation culture" for backing the rise in legal costs and premiums. "The committee has failed to recognise that the main cause of the recent increases in motor insurance premiums is ever-increasing personal claims and spiralling legal costs," said Nick Starling from the Association of British Insurers (ABI).

The Members of Parliament demanded more transparency fro what they called "the merry-go-round" of referral payments, particularly for personal injury claims, which have not only steadily increased over the past few years, but now also far outnumber the number of accidents.

They explained that referral fees were "made to or by insurance and law firms, rescue truck drivers, vehicle repairers, credit hire firms, claims or accident management companies and medical experts in connection with motor insurance claims".

The associations has also added that the rise in legal costs has added £40 a year to average motor premiums. The committee also stated insurers must do more to tackle fraudulent injury claims, which it said were the main reason for the escalating cost of motor insurance.

"With insurer control, such a unit could very quickly pay for itself. Fraud, particularly false personal injury claims, is in my view the biggest driver of premium increases," said Simon Douglas, director of AA Insurance, welcoming the idea of a special police unit.