In a tough talking report out this week, the Association of British Insurers (ABI) have hit out at Britain's compensation culture. They have joined forces with some of the UK's leading retail and business names, such as ASDA, Argos, Ford and Whitbread, to highlight the flaws in the current compensation system and press for reform of the way that these claims are funded.
The report is quick to point out that compensators have always paid genuine claimants the compensation they are entitled to, and will continue to do so. However, the ABI believes that the current system is flawed, being too slow and too expensive, and failing many genuine claimants who have a right to access fair, proper and timely compensation.
A 2009-2010 survey, the ABI found that for every pound paid in compensation, 87p was paid in legal costs. £2.7 million is said to be paid per day to claimant lawyers, with UK consumers picking up the tab through motor insurance premiums. The costs are felt by consumers in other ways too, with one large supermarket chain reporting that it needs to keep five stores open for a year just to cover the costs of personal injury claims. Inevitably this leads to more expensive weekly supermarket shops for us all.
The ABI believes that the current system encourages people to believe that there is a "have a go" compensation culture that can be exploited with exaggerated and fraudulent claims. Blame is heaped at the feet of Claims Management Companies, whose tactics include cold calling and sending texts to members of the public encouraging them to claim compensation even where there has been no accident.
High legal costs are also responsible for the continued increase in fraudulent claims, it is feared. Even where there are indications of fraud (such as "Crash for Cash" scams and phantom passenger claims), the costs needed to fight these claims are so high that it can frequently be disproportionate for compensators to defend them.
The ABI fully backs the recommendations of Lord Justice Jackson, a package designed to reduce excessive costs and ensure access to fair compensation for those with genuine claims, and calls for a ban on referral fees. It is hoped that these reforms will reduce the cost of litigation for insurers, local authorities, businesses and individuals alike, a change that will benefit everyone's pockets and still protect the position of genuine claimants.
A working party was established last month to consider the implementation of Lord Justice Jackson's civil justice reforms. Changes are afoot.