Jack Straw on Car Insurance

Muffin` · 27 Jun 2011 at 09:27

The Times said:
Companies are selling drivers’ details to claims firms exploiting the no-win, no-fee system

‘Our records indicate that you may be entitled to £3,450 for the accident you had. To claim free reply CLAIM to this message,” went the text that my pal Phil Riley received last week.
This “accident” was, in truth, a minor prang. Phil had stopped in traffic. The chap behind drove into him, with minor damage to Phil’s car; no personal injuries. The other driver’s insurer paid Phil’s repair bill.

Within days of this prang, 18 months ago, Phil was bombarded with texts and personal calls to tell him that if he would make a claim, three or four thousand pounds would be his for the personal injury he had suffered. He told the callers what they were doing was amoral. He had no injury. The texts and calls continued. Phil asked me, as his MP, how the claims companies had obtained his details including his mobile phone number. He had never authorised this. Didn’t he have some basic data protection rights?

I went to see the Association of British Insurers (ABI) and senior executives of two of Britain’s largest motor insurers and asked them. A long pause, a look of embarrassment, then one of the executives said: “This is the industry’s dirty secret. It’s we, the insurance companies, who sell on this personal information.”

Incredulous, I asked how it could be in an insurance company’s interest to sell information to a claims company that was used to make a claim against the self-same company. “If we don’t sell this information, others in the know will do so — recovery firms, garages, credit companies, the insurance company on the other side, even the police.” (One police force made £1.3 million in 2008-9.) The income from this trade is huge, £200-£1,000 for each referral. There can be several from just one accident. Referral fees are now a crucial part of all insurance companies’ revenue streams.

Phil had another question: “Why, for law-abiding folk with impeccable records, are car insurance premiums rocketing when our roads have never been safer?” The figures are stunning. In 2009 the number of road accidents involving personal injury was 31 per cent down from the average for 1994-98. Improvements in car safety mean that where there is an accident the risk of being badly injured has dropped significantly. Thefts of and from vehicles have also slumped — down by almost three quarters (72 per cent) between 1995 and 2010. Meanwhile, premiums have shot up by at least 30 per cent in the past year and in some urban areas by even more. Yet most motor insurers are still operating at a loss.

The answer to Phil’s second question is that law-abiding drivers are victims of “a dysfunctional system in which everyone behaves badly”, as one senior insurer told me.
The rewards for this bad behaviour can be great. The number of registered claims management companies has doubled to 3,400 in two years. Their high-pressure sales techniques have led to a phenomenal growth in the number and value of claims for personal injury. The cost of personal injury claims has doubled in ten years, from £7 billion to £14 billion. ABI analysis shows a direct link between the number of claims companies in a region and the level of claims. In the North West, with a high density of claims companies, 40 per cent of claims have a “bodily injury component”, compared with 25 per cent across the country — yet the region’s roads are no less safe.

The “bodily injury” that the claims company was enticing Phil to make was for “whiplash”, which now accounts for 80 per cent of all claims. It’s perfect for the claims companies: a soft-tissue injury that no scan or X-ray can pick up, so claims rely on the patient’s description. It’s usually entirely trivial. Respectable medical websites prescribe paracetamol. The cost to the NHS of treating whiplash is only £8 million. The cost to insurers of whiplash claims is £2 billion. Very odd.

The current “no-win, no-fee” arrangements for legal costs mean that it’s usually cheaper for an insurer to concede a claim than fight it. Add in the growth of “cash for crash” frauds and it’s little wonder that the law-abiding public are being milked as they are.

• The senior insurance executives I met are decent people. They dislike the unwholesome trap they are in. But they know that change must be imposed externally. Here’s how:
Referral fees should be outlawed, and the no-win, no-fee system speedily reformed, as Lord Justice Jackson’s 2010 review (endorsed by all parties) recommended;

• The law on damages for whiplash should be changed to require proof of serious injury, as other jurisdictions do;

• The Information Commissioner and Ofcom should crack down firmly on the trade in personal data and hard-selling techniques, if necessary with new powers;

• Much tighter regulation of claims companies must be introduced.

There will be howls from those with a vested interest in the present system, all protesting that what they do is in the public interest. It’s balderdash. This is not a system; it’s a racket. The quicker it’s ended, the better it will be for the law-abiding motorist, including my pal Phil.

Jack Straw is the Labour MP for Blackburn

The man speaks a lot of sense, let's hope there's cross party agreement on this and it's all hunky dory before my renewal.

ubersonic · 27 Jun 2011 at 09:36

What the heck? attack the cause of uninsured drivers instead of the drivers themselves? but surely if they do that it won't cause problems for honest road users like the new tax/insurance regulation has? If they root out the corruption in the insurance industry then our premiums will go down! how can any politician contemplate such a good idea!

Philz0r · 27 Jun 2011 at 10:13

ive been getting spammed with txt messages lately saying "you still can claime for your accident and gain up to 3500" i havent even had an accident.... Ive never replied to it lol.

Barks · 27 Jun 2011 at 10:21

I've had those text message too. I've also seen stupid bints on facebook asking how they can claim for whiplash fraudulently, was tempted to notify their insurance companies. It's utterly infuriating that they can get away with this. I want to see the very practice of 'no win no fee' completely outlawed, it removes the element of risk inherent to legal activity.

Firestar_3x · 27 Jun 2011 at 10:25

Car insurance in this country needs a complete overhaul it's a total joke imho.

DM · 27 Jun 2011 at 10:27

Firestar_3x said:
Car insurance in this country needs a complete overhaul it's a total joke imho.

This.

I dont even think about it any more, one of my pet hate subjects just gives me the hump.

antijoke · 27 Jun 2011 at 10:29

Glad I am not the only one who loathes car insurance.

It does indeed need a complete overhaul.

Philz0r · 27 Jun 2011 at 10:41

ive been paying car insurance for 8 years. Just done my renewal yesterday. Ive never had a crash and never made a claim. Never had any pelenty points. No claimes bonus is a waste of time now.

Lol this is why so many people drive around uninsured. For them its worth the risk.

Burnsy2023 · 27 Jun 2011 at 11:08

Muffin` said:
The man speaks a lot of sense, let's hope there's cross party agreement on this and it's all hunky dory before my renewal.

Indeed, I hope Jack gets the momentum to get these reforms through.

Deep · 27 Jun 2011 at 11:10

I've bought this up a few times but I feel really good about not claiming for whiplash when a lady went into the back of me.

Which is completely stupid, I shouldn't feel good about something is normal. A lot of my friends have done the whole fraudulent claims and I could have done it very easily, but it just didn't feel right.

As a side, when did this "blame culture" and sue everything that moves start coming in?
When I started driving I don't remember anything like this, but maybe I wasn't really paying attention back then

Firestar_3x · 27 Jun 2011 at 11:13

Deep said:
As a side, when did this "blame culture" and sue everything that moves start coming in?
When I started driving I don't remember anything like this, but maybe I wasn't really paying attention back then

About 5 years back with the constant spamming on the TV with stupid adverts.

DM · 27 Jun 2011 at 11:17

Thats the rub isnt it, 28 years i been driving for the first 20 of those you had an accident, well you had an accident, now suddenly you have an accident and your neck is ****ed and need paying for it.

I cant remember accidents being any worse 20 years ago.

But saying all that it really dont bother me any more when people claim, i just dont give a toss now, because i believe insurance in this country is broken beyond repair.

Jamauk · 27 Jun 2011 at 11:57

DM said:
But saying all that it really dont bother me any more when people claim, i just dont give a toss now, because i believe insurance in this country is broken beyond repair.

I agree, If the practice of no win no fee was outlawed the insurance companies would see a saving, however I doubt that would be passed onto the customers.

Mr Jack · 27 Jun 2011 at 11:59

Jamauk said:
I agree, If the practice of no win no fee was outlawed the insurance companies would see a saving, however I doubt that would be passed onto the customers.

Insurance is an immensely competitive industry. Savings will be passed on.

Vonhelmet · 27 Jun 2011 at 12:00

Philz0r said:
ive been getting spammed with txt messages lately saying "you still can claime for your accident and gain up to 3500" i havent even had an accident.... Ive never replied to it lol.

I replied to one with some rude words. I've since had some other texts from different numbers.

Glaucus · 27 Jun 2011 at 12:05

Does indeed speak sense, should also stop hospitals selling on data. It's the only way I can see that they got my data. Injury and date of injury and my personal phone number, which not even my employer has, or maybe the police as they are mentioned in the OP.

DM · 27 Jun 2011 at 12:07

Mr Jack said:
Insurance is an immensely competitive industry. Savings will be passed on.

I dont see that iv got to say, maybe in a minimal way saving would be seen but nothing like the extra profit for them.

Its a must have service isnt it, you cant opt out of buying insurance so you have a captive market there dont you.

Just an opinion of course i dont know anything about insurance.

Uriel · 27 Jun 2011 at 13:50

I started getting these text messages shortly after someone crashed into my parked car when I wasn't in it? Co-incidence?

PMKeates · 27 Jun 2011 at 13:54

I had someone from East Asia call the house the other day fishing for something. I told them my Great Uncle Bulgaria was passenger in a car crash where Douglas Flint (CEO of HSBC) was driving, but my Uncle was in a care home now partly due to the stress of the accident. They seemed very excited so I gave them Mr Flint's head office contact details to chase up.

Azza · 27 Jun 2011 at 13:57

Like a lot of companies selling on data isn't it. Mobile phone companies are the worst I've found, the amount of crap I get some times thanks to the CPW is just stupid!

And yes insurance prices are a joke etc etc.