Whiplash Claims causing Economic Disarray?

The Association of British Insurers (ABI) has criticised the role of solicitors in fraudulent whiplash claims at the annual Motor Accident Solicitors Society (MAAS) conference.

According to James Dalton, the assistant director of motor and liability at ABI, a fraudulent whiplash injury claim is sometimes facilitated or instigated by solicitors. Are solicitors more of a hindrance than a help?

Solicitors are regulated by the Solicitors Regulation Authority (SRA), which aims to ensure that legal professionals perform to a certain standard. Solicitors must be suitably skilled, knowledgeable and honest when dealing with clients, so decisions or actions that may be deemed incompetent, misrepresentative or unethical could be investigated by the SRA. Fraudulent whiplash claims, however, seem to escape the attention of the SRA, but is this because they are too small-scale or because there is simply no case to answer?

In May 2011, the ABI claimed the UK had become the “whiplash capital of Europe”. According to Baizer Kolar P.C. research, approximately 1,200 whiplash compensation claims are made in the UK every day, costing insurers around £2 billion every year. Whilst the accuracy of these figures has not been seriously doubted, the numbers fail to shed light on the prevalence of fraudulent claims; indeed, there is no fail-safe method for identifying such claims. So why has Mr Dalton picked on solicitors at the MAAS conference?

One reason might be the rising cost of insurance premiums, which is often blamed on uninsured drivers, criminals and whiplash fraudsters. What is not stated by insurance companies is that premiums are invariably inflated to protect or even boost profit margins. In August, Admiral announced pre-tax profits of £160.6 million for the first half of the year, whilst warning at the same time of an increase in personal injury claims. Insurance companies aim to make money, so it is hardly surprising that Mr Dalton has attacked what he deems to be fraudulent whiplash claims whilst insurers continue to reap huge profits from their customers.

Insurers More at Fault?

What is surprising, however, is that solicitors have been attacked when it is usually the insurance companies that refer whiplash claim cases to law firms and accident management companies. Mr Dalton defended this practice by stating that insurers have to recoup some of their expenses, but if fraud is such a huge issue affecting whiplash claims, why do insurance companies continue to generate business for solicitors? The answer is the referral fee, which is paid to insurers by firms in receipt of new personal injury claimants.

Insurers benefit whatever the validity of claims because their costs are easily covered by referral fees and insurance premiums. It should also be noted that several groups own most of the leading insurance companies operating in the UK, so costs are often passed between subsidiaries. This somewhat misleading economy can prove advantageous for firms looking to justify increased premiums, not least because only £8 million is spent by the NHS on treating injuries worth £2 billion. Speculation on this point hardly helps the average person determine whether solicitors are genuine.

Returning to the main point, a distinction ought to be made between accident management firms and solicitors. Following changes to the law, alternative business structures (ABS) can exist in various forms to provide a number of legal services. The call an accident victim might expect to receive regarding them making a claim for compensation is likely to be from an accident management firm. Free from some of the regulations imposed on solicitors, accident management firms are thought to play a critical role in fraudulent claims. Solicitors are sometimes involved in fraud, but they are certainly not the root of all evil.

This guest post was contributed by Denver Burke on behalf of Ead Merseyside Solicitors. He has been writing articles and content on a variety of topics across the web and is hoping to share his enthusiasm and knowledge on the subject.