The Ministry of Justice says a crackdown on fraudulent whiplash claims could slice £40 a year off car insurance premiums for honest motorists.
Describing the current level of dodgy claims as a £1 billion-a-year epidemic, it is putting a range of proposals out for consultation, with legislation expected in 2017.
This is excellent news. Fraudulent whiplash claims – ones that are either exaggerated or completely fabricated – are a scourge, adding £40-£50 to honest motorists’ annual premiums.
Anything that tackles this problem is worthwhile and it is crucial that insurers pass on every penny of savings by reducing premiums – something the government says they have pledged to do.
But we should not conclude that tackling whiplash fraud will eradicate problems in car insurance pricing.
Insurers are still using auto-renewal to push through price increases, hitting their loyal customers year after year.
At MoneySuperMarket, we’ve seen premiums rise by 14% in the past 12 months, partly because of whiplash, partly because of increases in insurance premium tax, and partly because insurers simply want to boost their profits from this class of business.
That makes it more important than ever for all policyholders to shop around to get the best deal every year.
We should also not forget that whiplash is a genuine injury in many accidents, causing pain, upset and inconvenience for victims.
Care must be taken to protect their interests in any action taken to bring the fraudsters to book.
But it’s the unarguably the case that whiplash claims are 50% higher than a decade ago, despite the UK having some of the safest roads in Europe, a fall in the number of accidents, and the fact that modern cars are inherently safer than older models.
This manifests itself in safety features such as automatic braking, airbags, and sophisticated construction designed to improve passenger outcomes in collisions.
The explosion in fraudulent claims has been fuelled, says the government, by a ‘predatory’ claims industry that actively encourages minor, exaggerated and fraudulent claims (we’ve all had those phone calls), driving up the costs of insurance premiums for ordinary motorists.
The MoJ consultation paper outlines plans to scrap the right to compensation or put a cap on the amount people can claim for minor whiplash injuries.
Capping compensation would see the average pay-out cut from £1,850 to a maximum amount of £425. Compensation would only be paid out if a medical report were provided as proof of injury.
Other measures include:
- introducing a transparent tariff system of compensation payments for claims with more significant injuries
- raising the limit for cases in the small claims court for all personal injury claims from £1,000 to £5,000
- banning offers to settle claims without medical evidence. All claims would need a report from a MedCo accredited medical expert before any pay out.