It's official - everyone is to blame for higher car insurance premiums
It can hardly have escaped anyone’s notice that car insurance premiums have gone mental, with typical annual increases of between 25% and 40%. While it is tempting to blame the insurance companies, who are out to make pots and pots of money after all, the UK head of a global insurance company thinks differently.
While the head of AXA probably has a vested interest in claiming innocence, he probably has a point. In addition to the referral fee culture encouraging frivolous insurance claims following an accident, which, to its credit AXA have outlawed within their company, people are just looking for an easy buck- to the soaring cost of the rest of us.
Some people are just a pain in the neck
Official Department for Transport statistics show the number of UK car accidents actually fell by 10% over the past three years, yet in the same period, the numbers claiming for an injury suffered in a car accident has increased by 43%.
The substantial increase in claims relate to smaller injuries, mainly whiplash, now running at about 1,200 new claims every day. While these could all be genuine sufferers in genuine agony, it seems inconsistent that the NHS spends about £8m a year treating genuine whiplash, while insurers pay out around £2bn in compensation. Perhaps.
Well, as we all know, times are tight for many people and so the temptation of an undiagnosable injury seems too much for a growing number of people. It seems that looting is not just a pastime for the young and disillusioned.
Secondly, the ‘no win, no fee’ culture permits recovery of high legal costs from insurers rather than the claimant, provides too great an incentive to try it on. Specifically, in 2010, the Ministry of Justice introduced a new process for dealing with motor injury claims of £10,000 or less and set a fixed fee for legal costs incurred at each stage of the process.
This means that, for a typical whiplash compensation claim of £2,500, the lawyer knows he or she will earn a fixed fee of £1,350. No wonder we are all bombarded with telephone calls, text messages and TV adverts aimed at racking up as many fixed fees as possible.
A simple claim like this will, with other associated charges,cost the insurance company's about £4,400. Every time.
But what can be done about it?
Short of giving the population a compulsory morality transplant, is there anything that can be done to stop it?
As far as whiplash is concerned, there is actually no medical process in which a doctor can either diagnose or disprove whiplash, which is why whiplash is a fraudster’s special dream. In 2010, 133,000 fraudulent insurance claims were detected, totalling £919m, an increase of 9% on the previous year. And those were the detected ones.
However, some countries have taken action to thwart the naughty malingerers. In Germany for example, there can be no claim for whiplash where the shunt takes place under 10km/h (6.2mph).
Also, if the Government and insurers could work with medical bodies to agree formal criteria for the diagnosis of whiplash, it would be far easier to prove or disprove cases. AXA would also like the onus of proof to rest with the claimant rather than the insurers having to disprove it. Well of course they would, and while it may deter those trying it on, this could also cause more trauma for those genuinely injured.
As a trailblazer on this issue, AXA also think referral fees should be banned. With an average value of around £800 per referral, this can add up to big bucks, and perhaps explains why insurers are essentially defecating in their own rear garden when the insurance company of the non-liable party to an accident sells their customer details on for a swift back-hander, knowing the other insurance company will have to pay out, rather than them. In Ireland, where a scheme taking lawyers out of the equation was introduced, motor premiums fell by 16% in the first two years.
Of course, if insurers can’t have the nice little earner on the side, who’s to say car insurance premiums won’t go up even further? Wouldn’t want to damage the insurance company’s profits now would we...