On 14th February Aviva published a report on its website that has subsequently been picked up by the media today (18th February 2013) suggesting that solicitors, lawyers, accident management companies and the like should be completely cut out of injury claims. Their evidence is compelling but other parties have been quick to respond negatively citing lack of impartiality.  Lets look at the cold statistics according to their site:

£118 is added to every motor premium for whiplash claim and 94% (yes 94%!) of motorists blame involvement of third parties for increased premiums

Whilst this relates to van and car insurance, further reforms could be extended to cheap liability insurances and Aviva commented that  drivers in the UK  want to see the back of the personal injury (PI) ‘compensation culture’ that is now costing every motorist an extra £118 on their annual motor insurance premium. What is not mentioned in the report is the percentage of motorists who capitalise on the services of claims management companies to profit – yes profit – from their actions.

Aviva’s report is called  ‘Road to Reform: Reducing Motor Premiums by Reforming the Personal Injury Claims Process’ and has been launched in advance of head of the Ministry of Justice Whiplash Consultation closing  March 2013. The report sets out to reduce excessive costs that have contributed to premiums rising by 80% since October 2008.  Their research also found that if underwriters handled claims outside of third party intervention, they reckon £1.5bn of excess cost could be wiped off of motor insurance premiums.

Aviva was quoted as saying: “Our primary concerns are that injured parties receive care and compensation as quickly as possible and that all motorists benefit from a reduction in the excessive costs that have built up in claims over the past few years. 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.

Aviva’s has called  for  a legal requirement on PI claimants to contact the ‘at fault’ insurer in the first instance (which surely makes sense?) rather than going to or being referred to third parties including claims management companies and PI lawyers. Third party legal fees (average current legal fee is £2500 for a ‘typical’ whiplash claim!!!) are removed from low-value personal injury claims, a saving that will benefit all motorists in reduced premiums significantly.
This is where there needs to be care : Aviva’s research shows that there is no difference in the compensation awarded to the injured party if handled directly or via third parties. However, the multiple third parties that can get involved in a claim add significant cost in fees. Aviva estimates that handling claims directly will cut £1.5bn of excess cost, approximately 50% of the current cost of handling the 550,000 whiplash claims received by insurers every year. This cost reduction could lead to premium falls of around £60 a year for the average driver but will insurers stick to a robust impartial decision or will commercial influences affect firms very quickly?

Aviva may support the introduction of a truly independent panel of medical experts to determine whiplash cases with a greater focus upon targeted rehabilitation, which consumers support but will other insurers? What system will be implemented to ensure compliance and impartiality are maintained?.

Aviva researched  over 2000 drivers to reveal that nearly 2 in 3 (63%) think that people seek compensation to get money to spend on whatever they choose rather than rehabilitation. This view is supported by further research of almost 400 UK drivers who have made a PI claim; this revealed that only 33% of people spent their cash compensation on medical treatment or physiotherapy, others said it was used to pay off household debt (29%), to buy luxury items such as TV’s (12%) or to go on holiday (9%).  Other uses admitted to include buying a car, putting it into savings and paying for tuition fees!!!!

According to further research, changes that the majority of motorists back are as follows – along with the writers opinion in brackets:

• Nil cash compensation for minor motor accidents where no-one was injured – only the insurance cover for the cost of repairing the vehicle (why isn’t this the case already?)
• A preference for care above cash – insurers should provide access to rehabilitation for their injuries, not cash compensation (without doubt – minor “whiplash injuries” will significantly reduce)
• A ban on excessive legal fees (what is excessive?) and the unnecessary involvement of lawyers or claims management companies (until an impartial system is set up, difficult to police)
• Independent medical advisers not connected to the person making the claim to assess injuries (why isn’t this the case already?)
• Tighter regulation on how claims management companies and personal injury lawyers market their services ( The American effect?!)
• A removal or clamping down on exaggerated claims via more stringent procedures to challenge suspicious minor injury claims (there should be fixed pre-agreed limits to dispense with pointless correspondence pushing legal bills up)

These should not be isolated to motor insurance but extended to all insurances where there is third party impact such as cheap property owners insurance or cheap restaurant insurance policies.

Crucially, it is important that all believers of the current system are happy to pay increased premiums and are critical with this in mind.