Calling for an overhaul of the claims system, a group representing the UK’s insurers has attacked the ‘no win, no fee’ compensation culture.
To form the Consortium for Compensation Reform, the Association of British Insurers (ABI) has joined forces with a number of companies including supermarket Asda, insurer Lloyd’s of London and catalogue chain Argos.
The consortium claims the growth in “spurious and exaggerated” personal injury claims, which grew in number by 72 per cent between 2002 and 2010, has resulted in higher costs for consumers, local authorities and the NHS.
The consortium’s calls come nearly three months after the Government pledged to tackle the compensation culture through its Legal Aid Bill.
As insurers themselves have come under fire for selling customers’ details to claims firms in return for high referral fees, the move may come as a surprise to some.
ABI’s director general, Otto Thoresen, said the civil litigation system is failing too many genuine claimants.
He said: “Compensators, such as insurers, retailers and local authorities, are committed to paying genuine claimants as quickly as possible. But too often this happens despite the system, not because of it.
“People can get more money quicker by claiming directly from insurers, but ambulance chasing lawyers can still manipulate the system.”
The UK’s compensation laws have seen higher insurance premiums for UK consumers, who pay £2.7m a day to claimant lawyers through motor insurance premiums, says the consoritum. The NHS paid out more than £257m in lawyers’ fees as a result of claims, which impacts taxpayers, the consortium added.
In a report on tackling the compensation culture, the ABI said the Government needs to stop aggressive activities of some firms that lead to unsolicited text messages and cold calls urging customers to claim.
The ease by which fraudulent whiplash claims are made and the selling of personal information of potential injury cases also need to be addressed, it said.
Lloyd’s of London general counsel, Sean McGovern, said Britain should not follow the US, where excessive litigation costs stifle economic growth.
“Insurers are committed to paying valid claims, but steps need to be taken to stop the further growth of a compensation culture in the UK. The costs of a litigious culture aren’t just borne by insurers but are a cost to society as a whole,” said Mr. McGovern.
Lawyers reacted angrily to the report, saying that claims the country is in the grip of a “compensation culture” are a myth.