Whiplash and Referral Fees: Who Really Fuels Britain’s Compensation Culture

by Watermans Solicitors on January 23, 2012

For those of you unaware of the recent activities of Jack Straw MP, Britain’s former Secretary of State for Justice, he has, for the last 12 months been spear-heading a noble crusade of justice to rid the UK of its “compensation culture” with particular focus on targeting personal injury claims arising from road traffic accidents.

Such has been the vigour of Mr Straw’s efforts that there is on-going debate within the UK legislature which has resulted in a recent report on the subject being published by the transport Select Committee on the cost of motor insurance in the UK.

The conclusions of this report describe a need to bring “sharp practices” to an end and that they “look to the insurance industry to start showing … leadership” in this regard.  This call however appears to have fallen upon deaf ears with the Association of British Insurers (ABI) describing themselves as “baffled” at the committee’s call for greater transparency and calling for an outright ban on referral fees, whilst making no commitment to have their members voluntarily abandon the process of selling their customer’s details on to 3rd parties.

Much debate has taken place about the relative ease in which individuals are able to obtain compensation for injuries they have suffered following a road traffic accident and the increased numbers of personal injury claims resulting from road traffic accidents.  However the question that seems to have been ignored is why this is the case.

Personal injury solicitor firms, are not the ones who provide compensation to their clients, they simply give the legal advice and assistance to guide them through the claims process and make them aware of their legal rights.  The compensators are the insurers.  In pursuing claims the onus is on the pursuer (or claimant) to show firstly that they were involved in an accident that was not their fault, and secondly, that they have suffered injury as a result of this accident.

In regard to proving that an injury has been sustained a solicitor must required to obtain the client’s medical records and thereafter have clients examined by a medical consultant to provide a full diagnosis and prognosis of the client’s injuries. This report would be prepared by a consultant surgeon who is independent of both the pursing solicitor firm and the insurer and not, as Jack Straw states”third-rate doctors in the pay of the claims management companies and personal injury lawyers”. This report would then be provided to the ‘at fault’ insurer to consider and thereafter make an offer of settlement.  Offers of settlement based on medical evidence will be based on case law and judicial guidelines which are referred to using a personal injury claims calculator to ensure that the clients receive a fair and just level of compensation for the injuries they have suffered.
Certain insurers have however deviated from this long-established practice, particularly in cases where the pursuer’s (or claimant) injuries are relatively minor.  Instead they elect to offer compensation on what is known as a “pre-medical” basis in order to quickly dispose of these cases.

This is a practice driven solely by insurers and the knowledge of this practice has been a significant factor in the growing number of personal injury claims submitted from road traffic accidents.  Insurers are almost encouraging claims with the offer of compensation without proof of injury.   Therefore, where the Transport Select Committee state that “the bar to receiving compensation in whiplash cases should be raised” they appear completely unaware that within certain insurers, the bar has been taken away altogether.

Added to this practice is the practice of 3rd party capture whereby at-fault insurers will contact the non-fault party directly in order to offer them compensation, often before they have had the chance to seek either legal or indeed medical assistance following the accident.  This is a large and very active culture  that exists and which is driving up insurance costs even without the involvement of the so called ’vultures’ that receive the blame publicly for rising insurance costs, namely claims management companies and personal injury solicitors.

Consider this, perhaps Jack Straw has missed the real target in his quest to expose and eradicate the “dirty secret” of claim referrals and alleged fictitious whiplash claims. Perhaps the real culprits are the insurers who have chosen to adopt practices which eliminate the need for proof of injury whilst they also consider themselves immune to data protection legislation.

Whilst the insurance industry continues to point the finger at other parties to explain the cost of rising premiums, they also continue to post record profits year on year.  This fact does however appear to be lost in the discussion on rising insurance costs.  One would also question how Mr Straw appeared completely oblivious to this “racket” whilst he was Secretary of State for Justice?

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