Do any of these phrases or notions ring a bell to you?
- Whiplash claims push up premiums
- We have a whiplash epidemic that is costing the consumer with higher insurance premiums
- There is a ‘compensation culture’ that needs to be stamped out
- If there were less claims, there would be lower premiums
Prepare to be shocked! Read on for an insight in to how it really works!
In April 2013 the government caved to pressure from the multi-billion pound insurer industry, who are known to regularly hand out millions of pounds in donations to political parties, to lower the cost of compensation claims and make the victims pay to claim to have an interest in their case. The Legal Aid, Sentencing and Punishment of Offenders Act stopped the payment of referral fees for cases, and stopped lawyers recovering all of a victim’s legal fees from the opponent.
On top of that, the fees a lawyer can recover for a road accident claim were slashed by more than 50%.
So why aren’t our insurance premiums falling?
The Insurers are Cashing In
In an article from The Law Gazette, according to sources from the London Stock Exchange, insurance giant Direct Line are cashing in on the reforms, seeing massive increases in profits and making no real effort to pass any of the savings on to the consumer.
Reports indicate that, first and foremost, they took a £14m hit since referral fees have been banned which was the act of insurers selling compensation claims to solicitors for money – and then blaming lawyers for a “compensation culture” which was later proved to be media fuelled myth with the insurers actually responsible for increasing claims.
As a law firm, we were never involved in the referral fee industry so you can rest assured I’m not being hypocritical in my views on this matter. It goes to show you how much the insurers were making by selling claims to solicitors though – £14m just for passing their policyholders details on to a lawyer!?
But the sources have shown that the loss of the referral fee money has made little difference to their profits which have soared by a staggering 70% – reportedly making £423.9m last year compared with £249.1m in 2012.
But what’s sickening is this – premiums have only lowered by 3% during 2013!
Law firms don’t make anywhere near that! This serves to show who really is cashing in when it comes to claims!
So all this moaning from the insurance giants who are already vastly wealthy private companies making billions of pounds in profits each year was never in the interests of their customers; they simply want to protect their profits. To be honest, we have been telling this to people for years.
If profits have soared by 70%, why are consumers’ insurance premiums not falling by 70%!?
They have got what they want and now pay a fraction of what they used to in legal fees to solicitors, and after years of promising that savings would be passed on to the consumers, they pocket the cash instead.
All this talk of compensation claims pushing up premiums was total nonsense; it was always about their profits. What’s equally as bad as that, in light of referral fees being illegal, they have created their own legal services division which they quote should ‘help to shield existing customers from potentially excessive third-party solicitor fees’ – even though legal fees for road accidents are fixed.
How can there be excessive third party solicitor costs if we only get a fixed standard sum per case?
So the next time you hear about ‘ambulance chasing lawyers’ and compensation claims costing you in higher premiums, think again – the insurers are cashing in, and you are losing out.
IMPORTANT: advice on this page is intended to be up-to-date for the 'first published date'.