UK government to act on fraudulent claims
Although insurance fraud comes in many guises, UK insurers have been lobbying their government in recent years to act on fraudulent personal injury claims.
Organised gangs, sometimes aided by corrupt law firms and medical experts, are said to be targeting insurers with fraudulent motor, disease compensation and public liability claims. Such claims also hurt businesses and their captive insurers, who may be paying for fraudulent, unmerited or exaggerated losses.
At the same time, claims management companies have been encouraging people to seek compensation, even where such claims are not merited. Association of British Insurers (ABI) research suggests that 83% of people have been contacted by a claims management firm encouraging them to take action.
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According to Aviva, whiplash claims costs £2.5bn a year, adding £93 to the average motor insurance premium. The insurer currently has around 14,000 suspect whiplash claims under investigation and recently successfully challenged a £250,000 insurance claim by 46 passengers on a ‘party bus’.
Last week, the UK government said that it would act on the recommendations made by the Insurance Fraud Taskforce, a cross-industry body chaired by former Law Commissioner David Hertzell.
In its final report, published on 18 January 2016, the Task Force made 26 several recommendations, including tougher regulation of claims management companies and stronger powers for the Solicitors Regulation Authority to stamp out fraudulent or corrupt activity among claims firms. It also called for measures to reduce legal fees associated with noise induced hearing loss.
Some of these requests have already been answered. The government announced in March that the Financial Conduct Authority (FCA) will take over responsibility for regulating claims management companies. Last year the UK government said that it would consult on removing general damages for minor soft tissue injuries – or whiplash claims – and an increase in the small claims limit for personal injury from £1,000 to £5,000.
The Task Force report was, however, received with scepticism by claimant lawyers. The Association of Personal Injury Lawyers believes that the insurance industry routinely misrepresents fraud figures and is fighting the government’s plans.
Despite this, the UK government said last week that it accepts the Insurance Task Force’s recommendations and will set out in due course how it proposes to implement them.
“However, there needs to be a concerted effort by all those involved in the insurance process to tackle this serious problem,” the UK’s economic secretary said.
“We therefore expect that all of those organisations to which recommendations are addressed take them forward with urgency. The government will do what it can to assist and, in order to make sure that all of the recommendations are actively pursued, we will seek an update on progress later in the year,” it added.
The British Insurance Brokers’ Association (BIBA) welcomed the government’s commitment to implementing the recommendations.
Graeme Trudgill, BIBA executive director, said: “As well as implementing the recommendations that resulted from the hard work of the Insurance Fraud Taskforce, the changes announced earlier this year to the regulation of claims management companies will really make a dent in this problem creating fairer outcomes for customers and insurers alike.”
The Insurance Fraud Bureau (IFB) also welcomed the recommendations and said it will work with government and insurers on their implementation, in particular around sharing data.
Ben Fletcher, director of the IFB, said: “We are glad to see that the statement clearly recognises that insurance fraud has a real impact on honest members of the public and that it is not a victimless crime. Tackling this problem requires a collaborative approach and we are fully supportive of this.”