Home Secretary Jack Straw has slammed the “racket” of insurers getting paid for passing on their clients’ details to personal injury lawyers.
Straw’s attacks on the motor insurance industry may have captured the headlines but he certainly isn’t the first to call for insurance companies to put their house in order on this issue.
Last year Neille Ryan, a partner in personal injury cases at south east law firm Furley Page, accused car insurance firms of perpetuating the myth of the compensation culture as a smokescreen for sky-rocketing premiums aimed at the hard-pressed motorist.
Reacting to the furore over Jack Straw’s comments, Ryan said that law firms are unfairly taking the blame for fighting for compensation for clients when insurance companies themselves are guilty of selling details of those very claims in the first place.
Ryan said: “For all the millions of pounds that the insurance industry has spent on their campaign to convince the media, the government and now the public that they are the good guys, they have been strangely silent about the scandal of insurers selling to solicitors the very claims which they so publicly decry.
“One major insurer, AXA, has said that it will no longer take referral fees from personal injury lawyers but there has been no rush from other insurers to take the same stance. Neither has there been very much in the way of comment.
“I can see the insurer’s interest in selling cases to lawyers while at the same time trying to discourage victims from claiming. It means the insurers get paid for the cases they sell, without having to face paying out on so many claims against them.
“Quite where the public’s interest in that lies, I admit I struggle to see,” added Ryan.
“AXA and Admiral, for example, have been making loud claims that high legal costs drive up premiums. However, when you drill down through the rhetoric, neither their points nor their figures stack up.
“In an article for the BBC website on 24 August, entitled ‘Why motor premiums are so high and what to do about it’, Paul Evans, AXA UK and Ireland chief executive no less, admitted that solicitors’ fees are fixed for all injury claims of £10,000 or less. He quotes a figure of £1,350 but this is untrue – the solicitor will often be paid much less than this.
“If, as Evans claims, the solicitor has paid the insurer £800 for the case in the first place (and we can assume that he knows, as his industry set that particular price) then who is the real winner – the solicitor who effectively gets paid a few hundred pounds for all their work or the insurer who receives £800 for a couple of phone calls?”
He added that the insurance industry has been vocal in its condemnation of a so-called “US-style compensation culture” infecting the UK.
“So far as I know no one within the insurance industry is claiming that anyone genuinely injured in a car accident should not be entitled to legal representation and compensation. Therefore what exactly is a compensation culture? Is it fraudulent claims?
“In which case where do the lawyers fit in? Are they encouraging or complicit in the fraud? If so, then there must be an awful lot of them to account for the huge increases in premiums we all face yet where is the proof about solicitors being prosecuted for their involvement in these frauds?
“There is none because the problem of fictitious claims has been exaggerated by insurers to deflect attention away from their wish to drive up profits with higher premiums while paying out as little as they’re allowed to get away with,” added Ryan.
In a further twist, Ryan said insurance companies are also benefiting from charging law firms insurance premiums to cover them when taking on ‘no win-no fee’ cases involving a motoring claim which may well have been sold to the solicitor by the insurance company in the first place.
Ryan said he agreed with Jack Straw’s calls for the government to ban referral fees. “Remove referral fees from the picture and you will see solicitors, who are subject to tight regulation in how they do business, offering their services to those motorists who feel they have a genuine claim.
“If the insurance sector is convinced that fraudulent claims exist in large numbers, they need to come up with the proof so that decisive action can be taken by the authorities to combat it. What’s more, if an insurance firm does not believe that a particular claim is genuine, they should fight it in court,” added Ryan.