Are we really expected to believe that the forthcoming personal injury ‘reforms’ will result in a reduction in claims and reduced insurance premiums?
What the forthcoming referral fee ban, the sanctioning of ABSs, and the proposed reduction in recoverable costs will achieve is the handing of the claims farming industry, and the solicitors’ profession, to the most prolific organised and effective claims-farming organisations ever seen. These are, of course, the compulsory third-party insurance industry and the largest of claims farmers.
These organisations are now simply forming ABS structures and buying or developing low-skilled ‘claims factories’ in order to farm claims for themselves. Of course this will not be illegal after the ban on referral fees, as no money will change hands.
Claims farming by the CTP insurance industry is already a massive problem. Anyone who has reported an accident to their insurers or brokers will know that immediately thereafter, the repetitive cold-calling harassment to bring a claim begins. Some insurance organisations even use their associated solicitors to screen the first incoming call from an insured reporting an accident. Some even farm claims from non-fault third parties against their own insureds.
The greatest irony is this. Normal claims referral marketers at least have to be contacted by someone who wants to make a claim. The CTP insurers/brokers are encouraging claims from their insured customers who are simply reporting an accident.
The government says traditional practices simply have to return to direct marketing to survive. But the simple fact is no marketing campaign will be able to compete with the claims farming insurance industry and national claims farmers, and the fixed costs proposed will simply drive traditional practices out of business in any event.
It gets worse. As claims farming goes into further overdrive, the CTP industry will complain about increasing numbers of claims (which they help to encourage) and will justify yet higher premiums, from which they will, of course, make ever increasing profits. Meanwhile, the ABS claims factory division they own will make profits which do not have to be factored in to the premium-setting equation.
If the government actually wanted to reduce claims farming and claims culture, it would ban the activity of referrals with or without fees, and we could return to the good old days. Simply banning payments for the referral of claims, ratifying ABSs and reducing recoverable costs will drive out the smaller competition and quality legal practices. Our premiums will continue to go up.
Christopher Hibbert, Sheldon Davidson, Manchester