Removing lawyers altogether from the small-claims process would save each motorist an average £60 a year on their car insurance premiums, a major insurer today claimed.
In a report into the personal injury sector Aviva called for claimants to go directly to the ‘at-fault’ insurer rather than a legal representative. The Law Society immediately dismissed the proposal.
Aviva’s report, which will be sent to the Ministry of Justice for its consultation into the small-claims limit, claims that excessive costs in the claims process have contributed to premiums rising by 80% since October 2008. Research found that if insurers handled claims directly an estimated £1.5bn could be stripped from the cost of premiums.
Dominic Clayden, claims director at Aviva, said: ‘We are campaigning for a more efficient system that removes the "interested parties" and requires people to deal directly with the insurer of the at-fault party.’
The government has already said it is minded to increase the small-claims court limit from £1,000 to £5,000 – effectively barring solicitors from the low-value claims process. The justice secretary, Chris Grayling, has since hinted he may support a further increase in the limit.
Aviva admitted in 2011 during the Legal Services Board consultation into referral fees that it received income from passing on customers’ details.
Its submission to the consultation added: ‘If Aviva did not do so the underlying cost of policies would have to rise, making Aviva insurance products uncompetitive in a market where referral fees are permissible and increasing the cost to consumers.
‘We therefore operate in line with the commercial realities of the market as it currently operates.’
Responding to Aviva’s report today, Lucy Scott-Moncrieff, president of the Law Society said: ‘Who do you trust to give you a fair deal? A lawyer working for you, or an insurer working for person or company in the wrong, whose main interest is minimising what they pay you? Would you seriously trust the other side's insurer to give you a fair deal?’
Criticising the practice of third-party capture, she said: ‘Some in the insurance industry already go directly to victims of accidents immediately after the accident to get them to sign away their rights for a cheque that is unlikely to have any relationship to what they're really entitled to. Today’s proposal seeks to take that a step further.
‘You need someone independent to make sure that you get what the law entitles you to have. It appears that Aviva wants to strip us all of our rights so they can make more profits.
‘The fact is that insurers could cut premiums now if they were willing to sacrifice some of their mighty profits and bumper dividends to their shareholders.’
Craig Budsworth, chair of the Motor Accident Solicitors Society, agreed that fraudulent whiplash claims are contributing to high insurance premiums, but said claimants must still have access to independent legal advice.
‘We must not have a system where claimants have to deal directly with insurers whose priority will be to keep their own costs down. This would restrict access to the independent legal advice essential to insuring that genuine accident victims receive the compensation they deserve.’