PI Brief Update

Transport Committee examines whiplash, referral fees and fraud - Editorial

23/01/12. Think fraud, think fees being paid for introductions and think, er, whiplash and some people might jokingly point to the House of Commons. But they are exactly three of the issues which have been examined in the recent follow up report [http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtran/1451/145102.htm] on the cost of motor insurance by the House of Commons Transport Committee. There were a number of matters which the report considered and this article looks at three of them: whiplash injuries, referral fees and fraud.

Whiplash injuries

One of the matters it covered was whiplash claims and it said in particular that it was "not convinced that a diagnosis [of whiplash] unsupported by further evidence of injury or personal inconvenience arising from the injury should be sufficient for a claim to be settled. I n our view the bar to receiving compensation in whiplash cases should be raised." it also said that if the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Bill did not reduce the number of claims then "there would be a strong case to consider primary legislation to require objective evidence of a whiplash injury". As someone who spent ten years practising as a personal injury barrister and representing both sides of the industry, the immediate problem with this sweeping statement is what type of objective evidence they are talking about? Whiplash is notoriously difficult to identify objectively and may well be one of the reasons why it also sometimes gets associated with fraud cases. But medical evidence is currently required to prove a personal injury in any event. So, perhaps the point may have been better made by encouraging more rigorous examination by GPs and consultant orthopaedic surgeons during the period of the injury. But for what it's worth, even this can raise difficulties since the doctors that a patient initially visits are not usually for the purposes of litigation but instead for treatment. In those circumstances, their duty is to the health and welfare of the patient and not an insurance company. It's a great shame that having examined all of the evidence the Committee didn't make a more detailed analysis of this issue rather than leaving the impression of somewhat shooting from the hip.

Referral Fees

In relation to referral fees, the Committee said that, “Although we welcome the Legal Services Board's new guidance on the transparency of referral fees, it does not go far enough.” They then specifically said: “Firstly, it relates to fees paid by solicitors but leaves untouched the fees paid by others involved with motor insurance claims, such as garages and credit hire firms.” Picking up on referral fees to bodies not providing legal work such as credit hire bodies and garages is extremely interesting since it might be argued that the non-legal sector simply isn’t covered by the LASPO. This might be because this is a distinction too far for the Committee or might it be that such regulation is now being explicitly considered. This is a huge and complicated issue for all sides and once again it is an enormous shame that it is dealt with in such a cursory manner.

Fraud

As for fraud, it was noted that their previous recommendation  for establishing a dedicated police unit for tackling insurance fraud funded by the industry had been agreed and the Association of British Insurers has said that it would be operational from 1 January 2012. The Association had said that it would “deliver a step change in enforcement activity against fraudsters, deter future offending and reduce losses”. They also encouraged the government to provide updated information as to an implementation timetable for the past proposals that the DVLA give insurers access to its database so that details such as penalty points and convictions can be checked when insurance is being arranged. All this is very worthy and I’m sure that the police unit in particular will be a positive step forward. But again, it fails to go much deeper into the problem such as looking at co-operation between insurers and insurers’ solicitors on the one hand and the possibility of tighter regulation by, for example, the Law Society and claimant trade bodies on the other. 

Separate to this, the Committee called on the Government to prioritise the implementation of Regulation by the FSA which could prohibit insurers from receiving referral fees across the board rather than only in relation to legal action. They also recommended that  Government review how the pre-action protocol and portal have operated since they were introduced, looking in particular at how the fixed costs associated with the protocol relate to the actual cost of the work involved and whether use of the protocol acts as an incentive for insurers to concede claims which ought to be defended. This review should be conducted and its results published within six months. This will be an issue to keep a sharp eye out for in the coming months. 

Conclusion

It is to be regretted that on these three issues at least the Committee seems to have lost a great opportunity to look at the complications and subtler details of this enormous industry.

PIBULJ Editorial Team

Image ©iStockphoto.com/bedo