Car insurers 'encourage fraud and exaggeration' say MPs

crashed car Half a million motorists make whiplash claims every year

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A group of MPs has accused the motor insurance industry of encouraging fraud and exaggeration in accident claims.

MPs on the Transport Select Committee said insurers must immediately "put their house in order".

The criticism came in their report on how the cost of car insurance is inflated by whiplash claims.

The insurance industry denied encouraging fraud, but admitted that more needs to be done to clean up the claims process.

"We accept entirely that insurers have played a part in a dysfunctional system, but we are making the case for reform, " said James Dalton, head of motor insurance at the Association of British Insurers (ABI).

MPs on the committee said insurance companies were guilty of accepting claims without proper scrutiny.

Start Quote

Unfortunately the motor insurance sector remains as opaque as ever. This needs to change,”

End Quote Report on whiplash Transport Select Committee

They said insurers often paid out without seeing medical evidence, or even where fraud was suspected, as it could be cheaper than fighting a claim in the courts.

In such cases, they said: "the industry as a whole is damaged, and motorists pick up the bill in the form of higher premiums".

"Insurers must immediately put their house in order, and put an end to practices which encourage fraud and exaggeration," the report said.

'Whiplash capital'

MPs also accused insurance companies of ignoring a previous recommendation to be more transparent about their links with other parties involved in accident claims, such as claims management companies.

"Unfortunately the motor insurance sector remains as opaque as ever. This needs to change," they said.

They said there was insufficient data to establish how many whiplash claims were fraudulent or exaggerated.

As a result it was not possible to verify a claim by the Ministry of Justice that the UK was "the whiplash capital of the world".

There were 477,000 whiplash claims in 2012/13, fewer than the peak in 2010/11, when there were 567,000 claims.

However, the ABI said that the UK was the whiplash capital of Europe.

MPs Recommendations

A car crash
  • Proof of whiplash to be provided by a doctor
  • Accredited scheme for medical reports
  • Routine audits on medical reports
  • Better data on fraudulent claims
  • Claims window to be reduced to one year

It said that 78% of low value motor personal injury claims were for whiplash in the UK, compared with an average of 48% in the rest of Europe.

In their report, the MPs argued that the claims system needed to be tightened up, in order to reduce the cost of motor insurance.

For example, they suggested that claimants should provide good evidence of injury.

"The government should consider requiring claimants to provide proof that they have either been seen by a doctor, or attended A&E shortly after the accident," said Louise Ellman MP, the chair of the Transport Select Committee.

"There should be a presumption against accepting claims where adequate proof of injury is not provided," she said.

The ABI conceded that current medical reports were "often not worth the paper they're written on".

'Clearer data'

But the Committee said that the cost of car insurance did seem to be falling. On average, it said, premiums had fallen by 34% in the last year.

In April 2012, an average annual premium was £1,132. In April 2013, that had fallen to £746.

However, the ABI accepted that more needed to be done to reduce fraudulent claims, and in doing so to reduce premiums.

"Whiplash now costs UK motorists over £2bn a year, adding £90 to the average premium," said James Dalton of the ABI.

It blamed dishonest motorists, and the activities of lawyers and claims management companies, who encourage the submission of fraudulent claims.

However, so-called referral fees, paid by claims management companies and lawyers to insurance firms, have been illegal since April 2013.

MPs are also asking insurance companies to provide clearer data on how many whiplash claims are fraudulent, and how many are exaggerated.

They said there should be an accredited scheme for medical practitioners who file reports on accidents.

At the moment, many such reports exaggerate the duration of whiplash injuries, so they should also be the subject of routine audits.

The MPs also said they were not in favour of claims between £1,000 and £5,000 being dealt with in the Small Claims Courts, an idea currently being looked at by the Ministry of Justice.

And they want the government to consider reducing the period in which a claim can be brought after an accident to one year, rather than the current three years.

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