What is the real cost of insurance fraud, recent research reveals all
A recent paper published by the consultancy firm Capital Economics and, funded by a Claimant lobby group “Access to Justice” (A2J) suggests that the figures quoted by insurance companies to the Government, in respect of the cost of insurance fraud in road traffic accident cases to individual policy holders are massively inflated.
The Association of British Insurers (ABI) suggests that the cost of fraud in road accident cases is £50 to each individual motorist but, it is likely to be nearer £4! It is understood that this figure is calculated on the basis of not just proven fraud but also where fraud is “suspected”.
As most lawyers practising in Claimant Personal Injury will know, fraud is regularly alleged by insurers, often to attempt to introduce an element of doubt in cases and subsequently reduce potential damages on the basis of the risk of the litigation. This appears to be the basis of the “suspected” figure.
The research carried out by Capital Economics, on behalf of A2J, using estimates provided by the Association of British Insurers, suggests that the cost of fraud falls to just £4 per policy when only proven fraud is included. Further, the research suggests that even when proven and suspected fraud is taken into account the cost is just £27 per policy, not the £50 figure which is quoted by the ABI and, which appears to be relied upon by the Government as the basis of their plans to scrap the ability to claim for minor soft tissue injuries as a result of road traffic accidents and, to increase the small claims limit to £5,000.
So, what does that mean for the Claimant on the street? Essentially, if you suffer a whiplash injury, as a result of a road accident, which is deemed to be “minor” (although what constitutes a minor soft tissue injury has not been defined) then, you would not be able to make a claim for your injuries. This is despite the right to claim for injuries being enshrined in both statute and common law. Further, if your injuries from any type of accident are worth less than £5,000 then, it is unlikely that a firm of solicitors would be able to deal with the case on your behalf as, only a very low amount (currently around £85) is paid by way of costs unless you agree to enter into an agreement which would result in the loss of a large percentage of your damages to cover the costs which are currently in the main recovered from the Defendant.
Whilst the ABI and the Government may think this is the best way to reduce fraud, I would disagree. This proposed Government consultation/reform is being supported by the ABI who continue to suggest that any savings made will be passed on to consumers. However, I and, I am sure many of you are yet to see reductions in your premiums following the introduction of the portal system and fixed costs in April 2013, for which the same promise was made.
The best way to deal with fraud is not to remove access to justice for the majority but rather, to encourage insurers to deal with cases properly from the start. Where fraud is alleged, it should be fully investigated and the majority should not be penalised on the basis of false promises of lower insurance premiums.
If you have been injured in a road traffic accident which was not your fault and you require legal advice please, do not hesitate to contact the personal injury specialists at Jordans Solicitors on 033 0300 1103.