Personal injury claims from car accidents cost the UK billions every year. Part of this is caused by insurers selling details of customers’ accidents to lawyers. At last, the government is set to ban these referral fees.
The cost of personal injury claims has doubled in the past decade, from £7bn to £14bn. This in turn has had an impact on car insurance premiums, which have risen by 40% in the past year. Finally the Office of Fair Trading has said it will investigate this damaging trend.
As far as personal injury claims, in many cases these are phantom claims, where no real injury has been incurred. Clearly someone’s making a killing and, guess what, it’s not the law-abiding consumer.
So you have whiplash do you?
Jack Straw MP, the former Labour cabinet minister, recently lashed out at the insurance sector for selling on customers’ details to personal injury lawyers. He chastised insurers for stoking the flames of litigation by selling policyholders’ contact details to firms who encourage people who have been involved in a prang to make a claim.
Thankfully, the government last week announced that it is to ban these referral fees, in order to stop exaggerated or even bogus personal injury claims from impacting insurance premiums for everyone else.
In fact, the most common claim is for whiplash, which often cannot be medically confirmed, given the lag between an accident and the matter being processed. Yet whiplash accounts for around four-fifths of personal injury claims, and costs the insurance sector about £2bn a year.
Can you afford further insurance hikes?
So if personal injury claims are pushing up the cost of insurance, why have insurers added insult to ‘injury’ by selling leads to these companies? The industry’s answer is that if they don’t, someone else will; be it the police or recovery services.
The industry may bemoan the costs incurred to them, but it’s motorists who have borne the brunt, as, on average, our premiums have risen by 40% a year – something that surely can’t continue for long or we’ll all be priced off the road.
Although the government is set to ban insurers from selling on customers’ details to personal injury lawyers, it would seem that some insurers are already breaking the law. Under current privacy legislation, a company cannot automatically opt you into receiving marketing from other firms. This should ensure that insurers can’t sell on your details to personal injury lawyers without your consent.
But a number of big insurers have clearly been abusing this legal requirement – hopefully the government’s latest action will put this to rest. In the meantime, if you fill out an online car insurance application and can’t see a clear opt-out of third-party marketing, think twice before proceeding.