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:
- ¾ the
reasons and consequences of recent increases in the costs of motor
insurance;
- 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
- 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:
| Period | RTA claims registered with CRU
| All claims registered with CRU | RTA as % of all claims registered with CRU
| RTA enquiries generated by NAH | All enquiries generated by NAH
| RTA as % of all enquiries generated by NAH
|
| 2004-05 | 402,974 | 755,875
| 53% | 12,474 | 42,263
| 30% |
| 2005-06 | 466,097 | 674,422
| 68% | 13,232 | 44,433
| 30% |
| 2006-07 | 518,821 | 710,784
| 72% | 15,690 | 46,266
| 34% |
| 2007-08 | 551,905 | 732,750
| 75% | 15,264 | 47,140
| 32% |
| 2008-09 | 625,072 | 812,348
| 74% | 16,953 | 58,331
| 29% |
| 2009-10 | 674,997 | 861,325
| 78% | 17,454 | 59,077
| 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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