The chief executive of the Law Society has publicly called for claims management companies (CMCs) to be outlawed.
Giving evidence to the House of Commons transport committee, which is investigating the cost impact on motor insurance from whiplash claims, Desmond Hudson said that the government ‘should make the practice of CMCs unlawful’.
While stressing that genuine claimants should be able to receive reasonable damages, Hudson said that the selling of claims by insurance companies may have contributed to exaggeration and fraud: ‘Which is why I think we should close down CMCs tomorrow.’
In response to questions from committee chair Louise Ellman, Labour MP for Liverpool Riverside, Hudson challenged the assertion that the UK is ‘whiplash capital of the world’.
Appearing alongside him, Andrew Ritchie QC of 9 Gough Square said the government’s claim that the UK had a disproportionate number of whiplash cases was based on ‘completely inaccurate’ official statistics of road accidents.
Government estimates rely on the STATS19 database, which covers accidents on the public highway that are reported to police and involve human injury or death. Because minor accidents are rarely reported to police ‘this is known to be inaccurate by at least 200 to 300%’, he said.
Craig Budsworth, chairman of the Motor Accident Solicitors Society, said the high incidence of slow-speed accidents in Britain could be explained by congestion. ‘The average car speed is the lowest in Europe, so minor injuries are more common… roads are slower in the UK which brings about more minor collisions.’
However Graham Stringer, Labour MP for Blackley and Broughton retorted: ‘That’s the equivalent of saying "my homework fell down the drain", isn’t it?’
Earlier, representatives of the insurance industry had cited studies claiming that anywhere between 10% and 60% of whiplash claims are fraudulent or exaggerated.
Asked where there were regional ‘hot spots’ in fraud, Dominic Clayden, claims director at Aviva UK, said there was a ‘strong linkage’ between the incidence of cash-for-crash cases and the prevalence of CMCs. ‘That may be coincidental,’ he said.
James Dalton, assistant director of the Association of British Insurers, told the committee that whiplash claims added £90 a year to the average insurance premium of £440.