Lincoln Lawyer: The real reason behind increased motor insurance premiums

— Katherine Jones is a law graduate who trained with McKinnells Solicitors in Lincoln. She is now a solicitor in the busy personal injury department.


In my UK compensation culture fallacy column, I wrote about people who, having suffered whiplash injuries in accidents, were being made to feel guilty about bringing legitimate claims. Several people responded by asking why I had not covered the situation where people make false claims, said by many to be the cause of rising insurance premiums. This is really the subject of a separate article, one I am happy to deal with now.

There are bad apples in every barrel and so it must be the case that not all people who bring accident claims are absolutely honest. Some do exaggerate their injuries. Some exaggerate their out-of-pocket expenses. A few even fabricate the circumstances of the accident itself to try to claim compensation to which they are not entitled. Such people are, relative to the total number of claims, very small in number and they are usually found out.

Compensation following an accident is not an automatic right. It has to be proved that the cause of the accident was the fault of the other side. This has to be proved on the balance of probabilities. Judges are not stupid. They can tell when evidence does not stack up and will dismiss such a claim.

Breaking down the myth

Let it be clear. Any claimant who tries to cheat by bringing an accident claim, which is not bona fide, is committing fraud and can be prosecuted. Similarly any solicitor who knowingly puts forward a bogus case will face severe disciplinary action. Accordingly, these sanctions do (in the very great majority of cases) deter people from bringing false claims.

Despite this, there is a popular belief that such claims are rife. This, at the moment, is a myth being perpetrated by insurers. Insurance companies are coming under increasing pressure from government because of significant rises to the motor insurance premiums we all face. Their explanation for this is that they are paying out more and more as part of a compensation culture. This is simply not true.

As stated, compensation is only payable where it is properly and provably due. The actual reality of the increase in insurance premiums is because insurers themselves have an interest in claims being brought, bizarre as this may sound.

Let’s look at this a bit closer. When you insure your car, how often is Legal Expenses Cover automatically added on? You are asked to pay an increased premium that will cover your legal fees in case of an accident. But what legal expenses are you likely to face? If you have an accident for which you are at fault then your insurance company is obliged to deal with those costs under your regular premium. Alternatively, if you are the victim of an accident then there are many reputable no-win-no-fee schemes run by local solicitors that guarantee you will have nothing to pay personally to pursue a claim. So what is Legal Expenses Cover for?

Well, if you have the misfortune to be involved in an accident then your insurance company will waste no time in telling you that you are ‘bound’ to use that cover and that their own firm of Panel Solicitors will act for you. Whilst telling you this, they will be busy selling your details onto those same Panel Solicitors for a hefty fee. On the other hand, if you inform your insurance company about an accident and there is no Legal Expenses Cover in place, then you are likely to be bombarded with spam texts, emails and cold-calls from unscrupulous Personal Injury Claims companies.

Where do they get your details? Right again; your insurance company has sold on your information. Heads they win, tails you lose.

A recent survey has confirmed that, apart from claims made as a result of a road traffic accident, personal injury claims have fallen steadily year-on-year. It is only road traffic accident claims that have mushroomed and that is only as a result of the way in which the insurance industry has conducted itself.

The system at the moment needs radical change. The government has proposed this by the decision to ban referral fees. In doing so, there is also the expectation that insurers will not need to sell Legal Expenses Cover either.

Whether this will help remains to be seen. Insurers have over the past dozen years got rather used to being able to exploit the system at both ends and it will take quite a culture change for them to accept that this should no longer happen.