Personal injury lawyers are urging the government to commission independent research about insurance fraud, disputing figures cited by the Ministry of Justice in its call for solicitors to act urgently to tackle the problem.
Following a review by an independent body set up by HM Treasury and the MoJ of the factors behind insurance fraud, justice minister Lord Faulks said last week that the government, which accepted all the recommendations made by the Insurance Fraud Taskforce, would publish its own action plan.
Faulks noted that the taskforce’s report highlighted a particular problem of fraud in relation to low-value personal injury claims. He added that insurance fraud was estimated to cost policyholders up to £50 each a year and the country more than £3bn.
The figure was challenged by the Association of Personal Injury Lawyers (APIL). It said the government should obtain independent evidence about the extent and nature of insurance fraud.
APIL president Neil Sugarman (pictured) said there was ‘no independent evidence available, as far as we are aware, which paints a clear picture of the situation, and we know figures for personal injury fraud are routinely distorted by the insurance industry’.
Sugarman said the association’s own figures obtained from the Association of British Insurers found that motor insurance fraud was a fraction of the level often quoted by insurers.
He added: ‘The facts available suggest that only 0.25% of motor claims are actually proven to be fraudulent. That includes policyholders over-egging their own claims, or making false declarations when they apply for insurance. Only a fraction of those will be whiplash claims.’
For fraud to be tackled effectively, Sugarman said it was critical that the government ‘aims at the right target, and the only way to do that is to commission proper, independent research’.
Law Society chief executive Catherine Dixon last week called for claimant and defendant representatives to work together to clarify the extent of the problem.
‘A starting point would be to have a clear definition of what constitutes a fraudulent claim so that the levels can be measured and targets set to reduce the cost of fraud,' she said in response to Faulks' statement.
‘In particular, the scale of fraudulent behaviour in obtaining a quote and securing a new motor insurance policy is unclear. Likewise, we do not know the cost of fraud to the consumer through higher motor insurance premiums.’
Last month Labour peer Lord Mendelsohn asked the government what assessment it had made of the taskforce’s findings that detected insurance fraud and undetected insurance fraud cost consumers up to £50 a year.
The government was also asked whether it planned to establish a unit to track the return of those costs to the consumer.
A response by commercial secretary Lord O’Neill of Gatley, published yesterday, echoed Faulks’ comments from last week, stating that the government would seek an update later this year on progress by all organisations tasked with taking forward recommendations.
O’Neill added that the government had established a programme of reforms in relation to low-value personal injury claims, particularly in respect of whiplash claims and regulation of claims management companies, which the taskforce’s recommendations ‘reflect and support’.