Will fraud crackdown save you £50 on your car insurance?

Minor car crash
The cost of annual car insurance could fall by as much as £50 thanks to measures unveiled by George Osborne, the chancellor, in his autumn statement last week and confirmed in his ‘Better Deal’ package, which is aimed at improving household finances The savings on premiums will flow mainly from the move to end the right to cash compensation for minor whiplash injuries.

 

Instead, ‘compensation’ would be in the form of practical medical care, so there will be no incentive to make false or exaggerated claims. The Treasury believes the move will stop “the cycle in which responsible motorists pay higher premiums to cover false claims by others.” It expects the insurance industry to pass an average saving of £40 to £50 per motor insurance policy on to consumers. This will go some way to off-set the increases to car insurance premiums that have been seen in recent months, and which have made shopping around for the best deal more important than ever.

Effective lobbying

Stephen Gaywood, the AA’s director of counter-fraud, has been lobbying for change for some years: “By giving successful personal injury claimants care such as physiotherapy, which compensation is supposed to pay for, those out to make a fast buck from an injury claim that may not have happened, will immediately be discouraged. “However, those who have genuinely suffered injury will get the treatment they need.” Some of the big insurers, such as Aviva and Axa, have already pledged to pass on the savings to consumers if and when the new rules come into force, possibly in April 2017.

Cost of whiplash

Whiplash is a big problem for insurers, costing the industry as much as £2 billion a year. It’s also a problem for motorists as it bumps up insurance premiums by about £90. Of course, some whiplash claims are genuine. But the industry is also besieged by false and exaggerated claims. Recent research by the AA suggests that 11% of motorists see nothing wrong in claiming for an injury following a collision caused by someone else, even if they are not harmed.

Suspect claims

Aviva currently has more than 16,000 suspicious motor claims under investigation, equivalent to 44 claims every day. Statistics from Aviva also show that 80% of motor injury claims include whiplash, a much higher figure than in many other European countries. In France, for example, whiplash claims account for about 3% of personal injury claims.

Cultural problems

Many experts blame Britain’s ‘compensation culture’. If you are involved in a car accident, it’s easy to lodge a claim for whiplash, especially if a claims management company or personal injury lawyer submits the paperwork on your behalf. Whiplash is tricky to diagnose, too, because it causes damage to soft tissue. In other words, there are no visible signs, such as cuts and bruises, and nothing that would show up on an x-ray. So if you say you’ve got a whiplash injury, no-one can point to evidence to suggest you are swinging the lead.

Volume control

The problem is not just fraudulent claims but also the high volume and high cost of claims. So insurers also welcomed the Treasury’s other announcement of its plans to channel more whiplash injuries through the small claims court, by increasing the upper limit from £1,000 to £5,000. The small claims court is both quick and cheap. If more claims go through the court, it could therefore reduce costs. It could also deter ambulance chasers from pushing through large numbers of low-value claims. Gaywood says: “Increasing the small claims court limit will help curb ‘ambulance chasing’ law firms who help clients claim for sums over £1,000 and who inflate claims costs by up to 80% through their fees and costs.” Aviva, for example, currently pays 80p to lawyers for every £1 it pays in compensation.

Reform measures

The government has already introduced a series of measures to try to curb the UK’s compensation culture. It has, for example, imposed a ban on referral fees paid by claims firms, insurers and lawyers. It has also cut from £1,200 to £500 the fees lawyers can charge insurers for processing basic, uncontested claims for compensation for minor injuries suffered in road accidents. Plus, anyone attempting to claim compensation for whiplash following a car accident has to get a medical report from a member of an independent panel of experts, known as MedCo.

Positive impact

The crackdown appears to have made an impact as there has been a £60 million reduction in ‘crash for cash’ fraud, with total scams now valued at £336 million, compared to £392 million in 2012, according to the latest figures from the Insurance Fraud Bureau (IFB). However, there’s no room for complacency. As many as one in 10 personal injury claims can be linked to suspected ‘crash for cash’ scams. And the average organised fraud ring is valued at £1.3 million. The IFB is also currently investigating more than 135 operations into organised motor fraud, worth in excess of £125 million. In fact, since the IFB was set-up in 2006, it has assisted with about 1,110 arrests, securing prison sentences totalling more than 340 years for criminals orchestrating ‘crash for cash’ scams.

Deliberate ‘accidents’

Crash for cash fraudsters deliberately cause accidents, usually so they can claim compensation for whiplash. So, the car in front will suddenly slam on its brakes. Or it might accelerate away from traffic lights or a pedestrian crossing, only to then brake sharply. Some criminals even disconnect their brake lights so you get little or no warning that they are about to stop.

Slip and trip

Criminals are also finding new insurance scams. The IFB reports an increase in the number of investigations into other types of fraud, particularly slip and trip.

Take the case of Andrea Hill, 48, from Anchorsholme, who was recently convicted of fraud by false representation after claiming injuries from tripping over a pothole. CCTV footage obtained by LV=, the insurer, proved that Hill was not in the area on the date or time of the alleged incident. The IFB says: “Criminals will attempt to defraud insurers of money across all areas of insurance, from fake household claims to bogus motor and liability personal injury claims, such as noise-induced hearing loss.” Of course, it’s honest motorists who pay the price. David Hertzell, head of the government’s fraud taskforce, says: “Fraud is anti-social. It is the honest customer that ultimately picks up the bill for insurance cheats and it’s the lives of innocent motorists being gambled with when a ‘crash for cash’ fraudster stamps on their brakes on busy roads. “The government will continue to support the insurance industry in stamping out fraud, but we all have a role to play in exposing the criminals.”

 

If you have any information about insurance scams, or have any suspicions about the activities of others, call Cheatline (powered by Crimestoppers) on 0800 422 0421 or report online to the Insurance Fraud Bureau.

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