Motor insurers face competition probe
The Office of Fair Trading (OFT) today referred the motor insurance industry to the Competition Commission after finding that motorists are being charged too much after an accident.
The OFT provisionally decided to refer the market in May this year after a study found evidence that competition was prevented, restricted or distorted.
Drivers responsible for an accident appeared to have little control over the way repairs and replacement vehicles are provided to the not-at-fault driver, the OFT concluded. This allowed insurers, credit hire organisations and repairers to inflate costs artificially.
May’s report found that insurance companies were inflating premiums for drivers by £225m a year in total through ‘dysfunctional’ practices.
Clive Maxwell, OFT chief executive, said: ‘Competition appears not to be working effectively in the private motor insurance market. The insurers of at-fault drivers appear to have little control over the bills they must pay, and this may be leading to higher costs for them and ultimately higher premiums for motorists.'
He added: ‘Having publicly consulted on our provisional decision, we are still of the view that there is no quick fix to these problems, and that a more in-depth investigation by the Competition Commission is therefore appropriate.’
The commission has up to two years to report its findings and has the power to impose remedies if it finds that insurance companies are deliberately harming competition. The Association of British Insurers (ABI) welcomed the announcement and said insurers had faced inflated rates for credit hire cars and excessive hire periods.
Nick Starling, director of general insurance at the ABI, said: ‘Regulation of all players in the market to tackle excessive costs is needed, and we look forward to working with the Competition Commission to bring much-needed reforms to the market.’
Responding to the report, Desmond Hudson, chief executive of the Law Society said: 'Insurers have for years blamed everyone but themselves for the rising cost of car insurance – policymakers, lawyers, drivers, etc. The OFT clearly believes that the sector needs put its own house in order, particularly in respect of repair and replacement car hire costs.'
Comments
Nothing to do with competition, it is fraud!
If the OFT finds that insurers have behaved in the way alleged, shouldn't all those involved be pursued for commiting fraud?
If there is found to have been fraudulent activity the government will also have a problem for associating with those who were at the heart of it, namely the insurers!
The problem for consumers will be that just like the banks, insurers will just be given a slap on the wrist, a fine that is peanuts, the odd senior head on a plate, and be allowed to continue with their practices until they get caught out again!
I complained to the OFT about
I complained to the OFT about this sector many months ago on the grounds of lack of competition. Trying to understand quotes for my motorcycle insurance premium was impossible. There is little doubt that insurance is a dark art.
That’s why they’re so keen to criticize personal injury lawyers
Of course we have all been ripped off by the insurance companies– the insurance industry has been absolutely rife with incredibly dodgy practices for years – that’s why they’re been so keen to put the blame on personal injury solicitors for the high level of premiums – it’s a smokescreen to hide the real issue –that they are the cause of the great insurance rip-off.
Denial of access to justice for many the real 'RIP-OFF'!
The OFT report when you get down to it says that insurers who are now incredibly efficient claims management companies themselves are taking advantage of the legal regime that exists, namely that victims of accidents are entitled to reasonable market rates for repair and hire and reasonable compensation for personal injury and other losses in a way that can distort competition in the market. They do this by being selective in operating third party capture regimes that pay the minimum possible to victims of accidents for injuries and repair their car in factories which concentrate on high turnover and cheapest labour and second hand and non-manufacturer supplied parts and a death trap 'courtesy car' for the least period possible when they are the ultimate paying party on the one hand and then making sure the person gets the best of everything that they are legally entitled to, by making the referral to credit hire and PI lawyers etc, when they see it is a competitor who is the at-fault party's insurer. Thus they aim to have cheaper claims costs than their competitor and can attract market share by charging premiums lower than the competitors. Nothing in the report will deal with excessive profit taking by insurers which is really what should be looked at. The 'rip-off' is that they are denying those they have to pay for the same level of compensation and service that they think a customer should be entitled to if someone else is paying!
Car Insurers profits
You say car insurers make excessive profit. Overall, claims paid out by car insurers were greater than premiums collected in each of the 10 years up until 2010. This is a loss - hardly your excessive profit.
Yes, the inflated repair costs and car hire charges to at fault insurers (and thence their customers) should be looked into. So should the practices of lawyers who thrive in the murky world of unprovable (and often ridiculous) injury claims for whiplash.
So when you talk about rip off's - I suggest, as a lawyer I assume, you look in the mirror.
If a claim is unprovable, it
If a claim is unprovable, it won't be proved and therefore there'll be nothing to pay out.
Provable claims and fraud
Basically there is an onus on the claimant to reasonably prove a clam. e.g that an accident took place. This is not that hard even if fraud is suspected. However, for an insurer to reject a claim (and for it to be backed up in court) the onus is on them to show they can invoke the policy fraud condition. This burden of proof is higher and it is very hard to prove a serious offence such as fraud, hence why many insurer's will rarely even allege it in individual cases.
Not saying that the burden of proof on each party is wrong. But it does explain why fraudulent claims do sometimes get paid because of lack of proof - or the insurer simply decides it is cheaper to settle.
Less than honest solicitors know this, hence why they take forward questionable claims. What makes me laugh is that the legal profession not only complain when claims are not paid but they complain when they are paid and criticise the insurers for not investigating fraud properly.
I said here before, until fraud is dealt with seriously at the roots (i.e when the client first approaches a solicitor or CMC) as well as at insurance investor stage, then the blame game will continue and fraud will continue to thrive.
Still don't get it do
Still don't get it do you?
The solicitor will advise a client if they have a case-on what the client tells them! The solicitor does not know (err-I've made this point to you before) what the position is.
We have an adversarial system -sorry about that but thats the way it is.
Personally I think it works well enough.
Not sure if you get it.
A point was made about whiplash and fraudulent claims by another reader. You picked upon a point made in that post about them being unprovable and therefore not getting paid. I responded to your post explaining why that is not always the case and why so many fraudulent claims get taken forward.
And you may think it works well. It probably does for you personally but I think we were also discussing the wider issues and concerns about this type of fraud.
Losing money for ten years in a row?
Makes you wonder about the quality of people in the insurance industry that they will persist in a business that they can't make money at for a decade. Me thinks the ABI doth protest to much!
All too true
I have had personal experience of exactly what Jonathan is saying above.
Several months ago another driver ran into my car and damaged the bumper. She admitted fault with no argument. In the days following the accident I was deluged by unctuous phone calls from my insurer's claims management company and car hire companies offering me the use of a "premium" vehicle for as long as I required it, an equally premium bumper replacement job and the chance to recover for my non-existent whiplash injuries. All of this made me very uncomfortable and in fact I accepted an offer direct from the other party's insurance company to pay for the repair themselves at my local dealership (who gave me a free, albeit modest, courtesy car whilst the repair was carried out).
In contrast, about three years ago my almost new car was stolen from outside our house as part of a burglary where my car keys were taken. I was not considered by the police to have been in any way at fault. Despite this my insurance company did everything they could not to pay out, including treating me as though I was the criminal, and the claim dragged on for months before settlement. Also because it was a theft I was not entitled under the terms of my policy to have a courtesy car during this time, having to meet the not inconsiderable cost of this myself.
I could barely believe the difference in the way that I was treated during the two claims.
Of one thing we can be
Of one thing we can be certain-the insurers won't roll over for the OFT the way the Law Society did!
The insurers will make mincemeat of the OFT. It'll be fun to watch-but it won't help the consumer/victim.
Claims experience
Stung
Claims settled directly by third party insurers (TPI) is a topic which has been discussed on other LSG blogs before. The practice has been criticised by readers on here on the basis that TPIs contacting non fault drivers is somehow wrong and dealing with claims on the cheap, only benefiting the insurer and not the driver.
There can be one of two issues surrounding claims dealt with in this way, but as I pointed out when this was discussed, claims dealt with in this way are often done cheaply, efficiently with the minimum of fuss and in most cases everyone is happy - apart from of course those parties who are not able to jump on the compensation bandwagon by hiring out the driver a Rolls Royce for an unlimited period. Your experience seems to support the observations I made previously and shows that not everyone is out to profit from an unfortunate accident.
Your experience regarding the theft is unfortunately fairly typical. Insurers do have to investigate these claims carefully but often their handling is woeful. Motor insurance policies generally do not provide a courtesy car for theft. I suppose the reasoning being that is a theft claim would generally be settled more quickly (than an accident claim) by paying the total loss sum once the loss is validated. I think in your case, the insurer should have provided you with a car for the inconvenience they caused and personally I would attempt to claim this back.
Everyone is happy? The
Everyone is happy? The injured person is happy because he's got £1000 for his whiplash injury - oh, and also because the at fault driver's insurer didn't tell him it could be worth two or three times that amount, or that it could be worth many times that amount if, for example, he developed a chronic pain/fibromyalgia condition. The insurer is happy, however, as they know for certain they are under-settling the claim. But hey, Kelly, in the strange world you inhabit, no-one needs a solicitor to protect their interests, do they?
Evidence
Kelly : "..and in most cases everyone is happy..".
What empirical or other evidence do you have to support that assertion?
Kelly, ignorance is bliss!
The problem with insurers dealing directly with the victims of accidents is that the insurer has no incentive to, indeed they have no obligation to, provide clear impartial, independent advice to the injured party. They only want to get the claim settled at the lowest cost. Victims unaware of their rights will be on the face of it very happy because they haven't realised they've been conned. Take Stung's experience. He would have been entitled to a like for like replacement vehicle for the duration his car was off the road. He may well have needed such a replacement but may have been content to accept a smaller car but he should not do so unless he has been given an informed choice as to what he wishes to do. In relation to the bumper repair, he may well have been entitled to a replacement bumper but been happy for a repair instead at a cheaper price, but unless he was given the time, and independent expertise, to understand what his options were and why he should repair vs replace or vice versa he really didn't know if he should be happy with what he did or not in the end. In addition he mentions that repairs where dealt with at a dealership, I'm going to infer from his previous experience that he may well have a car that was less that 3 years old at the time of the accident, a prime potential claim for diminution in value, albeit cars of any age can potentially suffer it. Did the insurer of the at-fault party even mention this to him and advise him to get an independent assessment, ie not one by their in- house engineer who tells him either that it doesn't apply or tells him a very low figure rather than the true amount, carried out? I doubt it. He may well have decided that he didn't wish to pursue a claim for that loss, but he should have been told about it. It's all well and good saying that if people were not happy they would complain, most if not all don't even know that they should! And can we really say that the silent victims of sexual and domestic abuse are happy because they don't complain? People need information and benevolent support, the problem is that those providing the information and support, on both sides of this argument, need to make an income to fund the provision of the support. This is why insurers maximise savings to increase profits and claimant groups have to maximise expense to create profit. The victim is entitled to the maximum, but may be happy with anything along the scale back down to the lowest, knowing that everything he gives up is a concession to the person who caused him the harm in the first place. As long as he is not ignorant of what he is doing he is entitled to make whatever choice he wishes to make and everyone should respect that. Without a legal regime which allows for the maximum benefit to be obtained, victims rights will be eroded there is no doubt of that and whilst insurers might not like that situation that is the market they are in.
Stung's case
I was talking about the case above but my comment applies to the majority of cases. Stung did not suffer whiplash or injury. Mind you if he/she had contacted a law firm perhaps you are saying they would have known better and an injury claim could have been put in anyway - just in case. Perhaps in five years time Stung might suffer flashbacks of the accident and therefore should have claimed some compensation.
No, I do not agree. People do not need a solicitor or a claims management company to claim for injury when there is none. To claim compensation for injury where there is none is fraud. The increasing involvement of solicitors and CMCs in motor claims is leading to an increase in fraud and higher premiums.
I never suggested Stung put in a non-existent injury claim
It's unfortunate that the insurance lobby think that everyone who goes to a solicitor for advice will put in an injury claim, but bearing in mind that most solicitors couldn't give a stuff about the client unless they are injured may be fostering that idea. However, they don't care because they cannot be reimbursed for helping clients unless they are injured so being commercial entities what is their incentive to be interested?. The gap is filled by credit hire companies who can be reimbursed for providing that assistance, whether the person is injured or not. If someone is not injured they should not make a claim for injuries, that doesn't mean they shouldn't make a claim for the full extent of the losses they have sustained should they wish to do so. Bad driving and accidents puts up claims, not victims being reinstated to their pre- accident position.
I bet you were one of those
I bet you were one of those who thought allowing referral fees and the "openign up the market" was going to be good for the client!
Absolutely not!
I think everyone should be allowed to keep their own profits. Referral fee arrangements are lazy marketing plans that in the main mean the service providers don't have to worry about providing good service to attract future customers. It also means that those who want to trade on service reputation are stymied from doing so. I'm still an idealist- maybe I haven't been swimming with the sharks long enough to believe things can be different.
'twas a reply/question to
'twas a reply/question to Kelly, old chap. No problem at all with what you say.
Oops!
Apologies anon!
Evidence
A Solicitor
Over 12 years ago I worked for a big insurer and I was there for about 8 years in all so had a good understanding of the way they did things throughout the business (both good and not so good)
Anyway, one of my roles for a while was working on a team in the claims area where we were passed details of third party drivers and the accident circumstances. If our insured was clearly at fault we used to phone the TP straight away and offer to book the car in for assessment, repairs if applicable and a courtesy car. We would offer a hire vehicle, but usually this would be a Class A type (e.g small fiesta) but we had the discretion to upgrade if say, there was a large family or special need of some sort. Nowadays I would guess many get a like for like vehicle as a matter of course. We would also ask if there were injuries and refer to a PI team if the answer was yes.
Out of say, ten calls I would sign up around 65% or so. The selling point was that we were dealing directly and therefore more speedier, less hassle and haggling between insurers and solicitors. Also no excess to pay to their insurer. The initiative was very successful and we had very good feedback from most of the people we signed up.
There were one or two issues that came up from time to time but overall it worked well. We saved money and the TP driver saved hassle. At the end of the day these people did not want a fancy hire car. They just wanted the claim dealt with and to be back on the road.
This is why I kind of take issue with the attitude in the legal profession. Yes, the insurance industry might bang on about TP drivers not receiving 'betterment' and the aim being to put the claimant strictly back in their pre- loss position and no more. When I worked there I felt that this principle was applied too rigidly and sometimes unfairly by some handlers and I used the discretion I had because I had sympathy with people who had accidents through no fault of their own. So, I would offer as much help as I thought that person genuinely needed.
However, the legal profession seems to have this view that people should get as much as possible from the fault insurer which I do not think is a consistent with what the TP necessarily wants and often this attitude only delays the claim. The view that the fault insurer should pay the maximum available (as mentioned in one of the posts above) is almost being punitive which I do not think is right. For example would a judge if asked by the litigant who won his case agree to award a sum beyond the expenses incurred or hourly rate - simply on the basis that the court case had inconvenienced him? I am not so sure and in my experience litigants often feel their real costs have not been fully reimbursed. But that's life and people move on.
I also recall many of my dealings with solicitors when I worked in claims. They were often unpleasant and confrontational and claims were always being delayed through their stubborness, unreasonable demands and nit picking everything. I am not saying all insurers are good but I did think that overall we were fair to people.
Hopefully, that is some evidence for you.
Evidence
No Kelly that's not evidence. That's personal anecdote.
By the way I spent 15 years in the insurance industry rising to Uk director level. I know exactly what was going on across the industry having spent a lot of time with senior directors from all the big insurers. Glad to see you tried your best to be helpful but it runs counter to what the intention was both then and now.
'Seems'
Kelly I have noticed you have a habit of putting your opinion into the mouths of those you seek to argue with by using the lazy debating style of deploying the word "seems".
"The legal profession seems to have this view that people should get as much as possible from the fault insurer..". That is a mis-characterisation of the entire profession simply to advance your own unproved and unsubstantiated personal position.
Solictor 18:41 and FT
My post is based on several years of experience of this specific practice. It is evidence - testimony is evidence. Do you think I would spend half an hour typing out a load of fabricated nonsense?
FT - I really do not understand the point you are trying to make. You are nit picking again. Precisely the kind of half hearted and dare I say, lazy response which you regularly see here when someone is unwilling or incapable of discussing a subject. However, if you wish to have a debate on the use of the word 'seem' or 'appear' in paragraphs I could probably give you some interesting pointers on writing style and why certain words are used in certain scenarios. I think in this setting it is rather obvious why I said the legal profession 'seem' rather than 'do'. It is an observation and an opinion based on alot of reading on here (rather than an undisputed fact) which invites the readers who disagree to come back and respond. Surely that is not so difficult to understand?
Do not assume that I spend my time here to simply berate solicitors. If I did, I could do that using one line as many of you do when dismissing the views of others who make an effort to debate a subject. Everything I post here is based on experience, research and knowledge and if you disagree, or my views are so ridiculous, surely you can respond to the points?.
For starters perhaps solicitor 18:41 you could explain how spending time with directors of big insurers means you know what is happening in the industry. Not saying you do not - but it does seem a rather sweeping statement when you have provided no further details. Also how is this relevant to the points made in my post about directly dealing with TPs?.
The majority of you really need to try harder.
Whether what you spend your
Whether what you spend your time typing out is "fabricated" nonsense is open to debate. What is not open to debate is that it is certainly nonsense.
I 'seem' to have made a spelling mistake
Just to anticipate any further point scoring, please note that I realise that I spelt the word 'solicitor' incorrectly in the title for the last post. For the benefit of FT, this is one sentence where the word 'seem' does not need to be deployed as it is an undisputable fact that I spelt it wrong.
Strangely enough, I actually
Strangely enough, I actually found your post about your experience in the insurance industry rather helpful-for a change (sorry, couldn't resist the barb!) because normally you just berate solicitors.
I am more than happy to accept that some claim handlers sought to assist the claimants and deal with the claims fairly. Why not accept that solicitors may do likewise?
What I think has happened is that the "commercial" element in both fields has become dominant-in other words make money at all costs. Personally, I attribute this change to the referral fee culture.
Kelly's gripe (repeated ad
Kelly's gripe (repeated ad nauseum) is about solicitors demanding money from private individuals.
This is alleged to be oppressive, manipulative and taking unfair advantage of individual people, who may not have the knowledge to argue back.
so why is it OK if an insurer does it, Kelly?
Demanding money?
Domcoop
I do not get the connection you make there.
Solicitors sending out letters to members of the public incorrectly or for non offences and breaching SRA rules is one thing. But what behaviour by insurers are you comparing this to?
The only thing I can think of is you are trying to say insurers dealing with claims directly, hence paying out less money is the same thing? Nothing dishonest or speculative about that. I think you are stretching it a bit far if that's your point - even for you.
Conflict
I think DomCoop's point is that you cannot sensibly complain about solicitors sending letters of claim (and letters of settlement) to unrepresented persons (whose interests conflict with those of the solicitors' clients), given that insurers often try to settle by direct contact with the injured party (whose interests conflict with those of the insurer).
In the file-sharing cases (about which you have complained on here), it was clear that the solicitors were acting solely in the interests of their clients and the relevant letters included an express suggestion that the recipients take legal advice. When an insurer deals direct with an injured party who has rights against the insurer's insured, does the insurer write to the injured party suggesting that he take legal advice before replying (or before accepting any settlement proposal)? I doubt it.
Domcoop's point
Me
O.K - I see what he may have been trying to say.
I think the comparision with the file sharing cases is not relevant to this particular debate or even to try to say that my views are contradictory when I have always supported each different view on the separate topics here with evidence, examples and research. I could answer the point about file sharing but I see little point.
I did say there were one or two 'issues' with the practice of dealing with TPs direct. When I worked for the insurer in question, the system did work well. However, there were concerns in regard to the rights of the third party if there was a subsequent dispute. Third parties (unlike policyholders) cannot complain or seek redress from the ombudsman which I understand is a similar situation in the legal profession. So, you have made a fair point on this.
I do not know what the situation is now or whether something is sent in writing explaining their rights parties before accepting. On the other hand I guess if the person was dealing through his own insurer and it makes an offer for the total loss of his/her vehicle, would that person's insurer suggest he/she takes legal advice before accepting - particularly when its interests conflict with that of its policyholder (i.e they want to pay as little as possible)
Would a shop which dealt with a complaint about one of its products make an offer of a partial refund but at the same time suggest to the customer they seek legal advice before accepting?
I suppose the next question which begs is, does the legal profession have to get involved in every dispute in every walk of life? Or does there come a point where people can resolve relatively simple everyday disputes themselves?
Knowledge
No, solicitors don't have to get involved in every dispute, thank god. The point is that there may be disputes where one party has a great deal more knowledge/power than the other party and may (intentionally or inadvertently) use that knowledge/power to take advantage of the other side: this was (if I recall correctly) one of the complaints made in relation to the file-sharing claims. It's a grey area, because no duty of care is owed to one's opponent, whether one is a solicitor or an insurer (and because it is not a relationship where there is any presumption of undue influence).
As regards insurers dealing with their own insureds, legal duties do arise. Where an insurer gets into the position of negotiating with its own insured (or reserving rights), it would be sensible to point out that the insured has the right to take independent advice. This probably does not happen in relation to most motor or domestic insurance claims, but frequently happens in relation to other forms of insurance (professional indemnity insurance, for example).
"We saved money and the TP driver saved hassle"
"We saved money and the TP driver saved hassle" - this is an interesting sentence, and one I believe is true.
Unrepresented claimants don't know how much their claim is worth. How could they? This inevitably leads to the insurer offering low amounts of compensation. Yes, the insurers will save money. And yes, the TP driver will seem happy. But that is only because he doesn't know any better. Ignorance is definitely bliss (as stated above).
In my experience as a claimant PI solicitor an insurer will always try to settle the case as low as possible. I will always try to get the maximum. There is always a battle and most times the outcome is fair to everyone. But when insurers are up against an unrepresented claimant it's an entirely unfair fight.
I suppose the next question
I suppose the next question which begs is, does the legal profession have to get involved in every dispute in every walk of life? Or does there come a point where people can resolve relatively simple everyday disputes themselves?
Would you Kelly? If you had an accident would you not rather take legal advice? We had a client, who was sideswiped by a bus. He had classic whiplash symptoms. The large multinational bus company, owned by the German state railway company, phoned our client within the hour with a hire car available and agreed to undertake the repairs. They also offered £1,000 compensation. Client came to us. He accepted the repairs and courtesy car (why wouldn't he), but not the offer. They repeated it to us as a "pre-medical" offer.
After we issued court proceedings, they settled for £4,200.
The thing is I'm not going to say "what bastards they are only offering £1,000". As no medical report had been obtained, how would they know it wasn't worth less, or more? That's surely the point. How would our client know if that's a good amount or not. Is he supposed to read the comments section of the Sun Newspaper website, and decide based upon the opinion of TaxiDriverJack who refers to "scrounging compensation thieves getting payouts for nothing"? Is he supposed to take the advice of the claims handler at the bus company's in-house insurance centre?
And I don't see much evidence of you "settling your disputes" on your own. I see evidence of complaints to the Legal Ombudsman, the SRA, internet forums etc., to assist you with your own alleged legal issue. So why can a claimant not get help to put their case forward?
Quiet
Kelly - cat got your tongue?
Just to be clear...
My earlier post seems to have started a lively debate and some of the comments about the industry have been very interesting.
For the record when the other party's insurer telephoned me, they did not make any suggestions as to where I had the repair carried out, what type of courtesy car I would have etc. I wanted the work done at my local dealership where all my servicing & MoT work takes place and so I asked the insurer if this would be possible. My own insurer was not willing to consider having the work done at anywhere other than its own approved bodyshops, none of which were actually centres for my particular make of (fairly expensive) car. This was a deciding factor for me in choosing to deal with the other person's insurer direct. Also, it was my choice to accept the free courtesy car from my dealer's repair centre. I could have had a hire car comparable to my own damaged vehicle paid for by the other party's insurer, had I wished.
I do agree, however, that my circumstances were straightforward. In particular there was no great amount of damage caused to my car and I did not suffer any injury at all. I can see that many people would be better served by taking legal advice on their situation before deciding what to do.
That's exactly my point!
Stung, you're last paragraph is exactly what i was trying to convey. People in an accident need impartial advice, the problem is that there is no one to provide such advice as the competing interests tend to want to maximise the profit for giving assistance, and its usually a high pressure situation requiring reasonably quick decisions so there is no time to check out the ethos of those offering help. Both sides might have good and bad service providers but there is no easy way to know before the decision to go ahead with them is taken.