The cost of motor insurance - Transport Committee Contents


Written evidence from National Accident Helpline Ltd (CMI 26)

SUMMARY OF MAIN POINTS

1.    National Accident Helpline (NAH) is pleased to respond to the Transport Committee's inquiry into the reasons for the rising cost of motor insurance. We would also be delighted to provide further details of our submission through oral evidence if required.

2.    This document will focus specifically on three areas of the Committee's inquiry:

  1. ¾  the reasons and consequences of recent increases in the costs of motor insurance;
  2. ¾  the extent to which the cost of motor insurance is influenced by the prevalence of road accidents, insurance fraud, legal costs and uninsured drivers; and
  3. ¾  whether there are public policy implications of the rise in the cost of motor insurance.

INTRODUCTION TO NATIONAL ACCIDENT HELPLINE

3.    National Accident Helpline is the UK's leading free advisory service for people who have suffered an injury as a result of an accident. We help these people seek financial assistance to aid their recovery, through our national solicitor network of over 200 specialist solicitor firms, our panel members, from across the country (including Scotland and Northern Ireland).

4.    National Accident Helpline is the largest advertiser in the personal injury sector with TV advertising spending of approximately £8 million during 2010.

5.    National Accident Helpline is authorised by the Ministry of Justice in respect of regulated claims management activities and is a registered company, incorporated in the UK. Furthermore, we have a strong track-record of working with the MOJ to restrict the 'cowboy' practices which give our sector a bad name. In December 2010 we have already reported three claims management companies for bad practice.

6.    NAH was formed in 1993, in advance of both the introduction of conditional fee arrangements and the Access to Justice Act. We were formed by a group of solicitors who saw the economic advantages of pooling resources and advertising through a national brand to help people frightened of approaching solicitors directly to obtain advice and, where appropriate, pursue their rights to claim for personal injuries suffered by them.

OUR MODEL

7.    The NAH model is significantly different to arrangements that operate in other areas of the personal injury market and that involve referral fees. The NAH model is a pooled marketing model, rather than a referral model. Indeed, this distinction was recognised when NAH was established in 1993 at a time when referral fees were not permitted in the legal system. The Law Society has recognised that the NAH model did not involve referral fees and that our pooled marketing arrangements are different.

8.    NAH has no contract or other arrangement with the inquiring consumer; the service to the consumer is entirely free. We do not "sell on" or "auction" claims to our panel firms or others.

9.    We are proud of our Customer Charter, which goes above and beyond existing regulatory frameworks and has been designed as part of NAH's wider campaign to champion the consumer, demystify the compensation process and remove the barriers to justice. The Charter guarantees that NAH will only help genuine claimants and will never cold call or pass on details to other organisations, as well as reaffirming its commitment to allowing customers to keep 100 per cent of their compensation.

10.  NAH received around 195,000 inquiries in 2010 from consumers who were accident victims and who wanted advice and help on what to do. Of these, our legally trained call centre staff referred 62,000 to one of our panel members with a geographic or specialism link to the consumer, filtering out 68% of claims as either unlikely to succeed or spurious.

INCREASES IN THE COST OF MOTOR INSURANCE

Has there been a rise in RTA claims and consequently the cost of motor insurance?

11.  The majority of witnesses giving oral evidence to the Transport Select Committee during the oral evidence session of Tuesday 9 November 2010 indicated that there had been a recent rise in the number of RTA claims. NAH agrees that this is the case. However, we strongly oppose the view that the main cause of the increase in personal injury claims from 2005-10 is advertising of claims management companies and TV advertising.

12.  Evidence provided by the Compensation Recovery Unit, when compared with our own market data, indicates that while the number of RTA claims reported to the CRU has increased by 25%, the number and percentage of RTA enquiries generated by NAH has remained relatively constant:
PeriodRTA claims registered with CRU All claims registered with CRURTA as % of all claims registered with CRU RTA enquiries generated by NAHAll enquiries generated by NAH RTA as % of all enquiries generated by NAH
2004-05402,974755,875 53%12,47442,263 30%
2005-06466,097674,422 68%13,23244,433 30%
2006-07518,821710,784 72%15,69046,266 34%
2007-08551,905732,750 75%15,26447,140 32%
2008-09625,072812,348 74%16,95358,331 29%
2009-10674,997861,325 78%17,45459,077 30%

13.  We anticipate that our main competitors have data which presents a similar picture, indicating that the rise in RTA claims is in no way linked with TV advertising in the personal injury sector or marketing by claimant solicitor collectives.

14.  The number of RTA enquiries generated by NAH has remained constant since 1993 at around 30% of our overall enquiry mix. The increase in the number of RTA cases is therefore being triggered by something, or someone, else.

What are the reasons for increases in motor insurance?

15.  It is NAH's view that liability insurer activity is a major cause of increases in both the number of motor personal injury claims and the cost of motor insurance.

16.  It is well known that a number, if not the majority of RTA liability insurers refer personal injury claims to solicitors for referral fees, commonly exceeding £700. Some insurers auction off cases to the highest bidder. Where claims are not sold on immediately, insurers often sell on their data for farming by third parties who act as a white labelling agent. It is notable that during the Transport Committee's oral evidence, the insurance industry was unable to provide data to the committee regarding their own involvement in RTA referrals.

17.  We are aware that a large number of insurers sell on claims and it is our view that the committee should specifically ask the insurance industry for the figures of the number of claims they sell on - or, if this is denied, be asked to provide evidence to the contrary.

18.  We are particularly concerned that the use of "Third Party Capture" has led to a significant increase in the numbers of RTA claims. Third Party Capture is a tactic used by insurers whereby they offer claimants financial settlement for compensation ahead of the claimant consulting a solicitor or obtain medical evidence detailing the full extent of their injuries. This activity is designed to reduce claim costs by preventing the need for an injured person to seek the advice of a solicitor. We believe this insurer activity has led to an increase in the number RTA personal injury claims.

19.  It is highly disingenuous for defendant insurers to suggest to claimants that they do not need their own representation and can rely on equal and fair treatment within defendant insurance companies' own processes. There is no reason whatsoever to believe that defendant insurers would suddenly prove capable of treating claimants neutrally and fairly, when so much practice to date has shown that this is often far from the case.

20.  More importantly for this enquiry, Third Party Capture is an important reason behind the number of RTA cases and we would query whether raising the number of claims generated by third party capture has any upward impact on insurance premiums. Again, we think it would be beneficial for the Committee to ask the insurance industry about its practices in this area in order to have a more balanced view about the causes of increased motor premiums.

CONCLUSION

21.  NAH has strong evidence showing that the rise in RTA cases is wholly unconnected to TV advertising by solicitor marketing collectives and claims management companies, as proven by our figures which show no rise in RTA cases coming through NAH. We believe that defendant insurer activity, particularly in selling on claims, accounts for a large proportion of the increase in RTA claim numbers from 2005 onwards.

22.  NAH would be extremely happy to discuss this issue further with the Transport Select Committee and to provide formal oral evidence to the committee.

December 2010



 
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