Group forms to fight compensation culture

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 to form the Consortium for Compensation Reform.

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.

The move may come as a surprise to some, as insurers themselves have come under fire for selling customers’ details to claims firms in return for high referral fees.

Otto Thoresen, ABI’s director general, 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 consortium says 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. 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.

Sean McGovern, Lloyd’s of London general counsel, said Britain should not follow the US, where excessive litigation costs stifle economic growth.

He said: “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.”

Lawyers reacted angrily to the report, saying that claims the country is in the grip of a “compensation culture” are a myth.

Law Society chief executive Desmond Hudson said the ABI report was entirely self-serving to the insurance industry.

“The claim that there are ‘ambulance chasing lawyers’ manipulating the system is utterly unpersuasive. If this is happening why are the insurers not acting and challenging these cases in the courts? It is nonsense and the ABI should know better,” he said.

“Our concern is the proposals will mean that many people who suffer loss and damage will not be able to get compensation and the insurance industry will not have to pay anything out. You can see why the insurance industry might support such proposals.”