Many different firms, including Ford, Asda and Argos have joined forces to condemn what they call ‘ambulance-chasing lawyers’.
The firms, who are led by the Association of British Insurers (ABI), say that they are fighting back following a 72% increase in the amount of bodily injury claims which have been received by insurers since 2002 and therefore the rise, or possibly a large percentage from it, is able to be traced straight back to claims management companies which send text messages urging prospective clients to try and pursue claims against companies or insurers.
The ABI says that far too many injury claims are now ’spurious and exaggerated’ and that organisations such as the NHS face losing thousands or millions of pounds each year. It says: “The current system encourages many people to think that there’s a compensation culture that they are able to exploit with exaggerated and fraudulent claims. The cost of this will be paid by millions of honest customers.”
Now, along with a number of other companies, it’s formed the Consortium for Compensation Reform, which demands an entire overhaul of the claims system. As evidence the ABI produces statistics showing that NHS legal fees have risen by 5 percent since 2004 while claimants’ costs have risen 130%. It says that a particular supermarket chain revealed that the money it now gives towards compensation payouts is equivalent to the annual turnover of five of its stores.
The ABI also turns its fire towards whiplash claims, that have also risen sharply, partly because it is seen as an injury that is difficult to diagnose.
The action taken by the consortium comes almost three months after the government proposed a Legal Aid Bill to try to tackle the trouble and which is to be debated shortly by a committee of MPs. The ABI’s involvement with the scheme has surprised some as insurers themselves have featured in the spotlight for selling customer details to claims firms in return for a referral fee.
The Justice Secretary Jonathan Djanogly has attacked the use of referral fees in injury claims and the government is now committed to legislation to prevent them. The previous Justice Secretary Jack Straw has been vocal in his criticism of the business which is estimated to be worth about 3bn and that is proven to raise the prices of car insurance for all drivers. He said that this practice was a ‘racket’ which should be banned.
Otto Thorensen, the director general of the ABI said that many genuine claimants are losing out under the current civil litigation rules though the consortium’s actions have already been heavily criticised by some within the law. Desmond Hudson, chief executive of the Law Society claimed that the ABI’s actions were self-serving to the insurance industry and he rejected the suggestion that ‘ambulance chasing layers’ were manipulating the system.
He added: “Our concern is the proposals will mean that many people who suffer loss and damage will be unable to get compensation and the insurance industry won’t have to pay anything out. One can see why the insurance industry might support such proposals.”
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