A recent increase in whiplash claims has prompted calls for the laws on compensation to be reformed by some insurers. Their concern lies with the amount of money awarded in whiplash cases; there are suggestions that this is too high. There may, however, be other factors that are being overlooked that have a larger influence on these figures.
Keeping Premiums Low
The Law Gazette reports that the Managing Director of insurers Direct Line, Tom Woolgrove, believes that the only way to keep customers insurance premiums down is to decrease the amount of money that claimants receive for 'low-level claims'. He said:
"The big element still is the general damages we pay for claims there is a genuine public policy debate about the rights of the claimant to damages versus the cost to everybody paying for premiums."
Mr Woolgrove also believes that this is the main contributing factor that is preventing premiums from falling further. He acknowledges that fraudulent claims are a problem for insurance companies, but says that the priority should be reducing legal fees to save money for consumers. As more cash is being paid out in compensation (thus, costing insurers more money), it is therefore reflected in the cost of premiums.
Paying For Fraudulent Claims
However, it was reported earlier in the month that an estimated 1 billion is paid out every year in fraudulent whiplash claims alone. The average payout for whiplash was 9,512, with the number of individual claims increasing from the previous year, despite the number of car accident damage claims decreasing. This inconsistency indicates that fraudulent claims may be on the rise. These statistics may be misleading though, as we are given no indication to the nature of the accidents, and these numbers could be wide of the mark.
Winners And Losers
If the rules are reformed it may hinder genuine claimants in receiving the compensation they are entitled to. It will also make independent legal advice harder to come by. In short, the only people to benefit from any further changes would be insurance companies themselves.