Law Society rejects ABI claim that solicitors facilitate insurance fraud amid concern that cold-calling ban could go

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15 September 2016

Dalton: claimants and their lawyers have moved on slip and trip claims

Dalton: claimants and their lawyers have moved on slip and trip claims

The Law Society has hit back at the Association of British Insurers (ABI) for claiming that solicitors are involved in insurance fraud.

Separately, the Association of Personal Injury Lawyers (APIL) has expressed concern that the rule which bans solicitors from cold-calling members of the public could be dropped as part of the Solicitors Regulation Authority’s review of its Handbook.

There has been a notable increase in insurer rhetoric about fraud this month, in the wake of an accusation in The Times that they were “cheating” policyholders by not passing on the savings made from whiplash reform to date.

The government’s much-delayed consultation on the next round of PI reform – raising the small claims limit to £5,000 and removing general damages for ‘low value’ whiplash cases – is still expected to go ahead.

Speaking earlier this week on BBC Radio 4’s Today programme, James Dalton, the ABI’s director of general insurance policy, said that “as the industry has got better at cracking down on fraudulent whiplash claims and motor claims, claimants and their lawyers have moved their attention to liability claims”.

As a result, there has been a 36% increase in fraudulent slip and trip claims last year, he said.

He was interviewed following publication of data by the ABI that said in 2015 insurers detected more than 130,000 fraudulent claims, equivalent to 2,500 a week, up 6% on 2014. These frauds were valued at £1.3bn, down 3% on 2014.

Dishonest motor claims remained the most common frauds and of highest value, according to the ABI – 70,000 detected, down 2% on 2014, with a value of £800m, down 10%.

In response, Law Society chief executive Catherine Dixon said she did not accept that solicitors were actually facilitating fraudulent claims.

“Quite the contrary, solicitors are helping to support people who have been harmed through no fault of their own to secure access to justice and receive the compensation they are entitled to in law to help them recover and rebuild their lives. If there is a concern that a claim is not genuine then such a claim should be defended and no compensation paid.

“We would encourage the ABI to work ever more closely with solicitors to identify and eradicate fraud while ensuring that those who are entitled to compensation are paid fairly and properly.”

Meanwhile, in her report to today’s Law Society council meeting, Ms Dixon said publication of the government consultation could be this month, although no firm date has been announced.

The Ministry of Justice has indicated privately that the delay has been the result of wider government upheaval following the Brexit vote, rather than any change of direction from the new ministerial team.

The ABI’s figures follow Aviva’s latest Road to reform report, which said that if the next round of whiplash reforms were implemented – raising the small claims limit for PI to £5,000 and removing the right to claim general damages for ‘minor’ soft tissue injuries – premiums would reduce by an average of £43. The company pledged to pass on “every penny of savings from these reforms to our customers”.

It added: “Pressure for action from consumers is set to climb further as motor premiums continue to rise – up 10% year-on-year, according to recent figures from the ABI. Back-to-back increases to insurance premium tax, from 6% to 10%, are partly behind the increase. However, it is the frequency and cost of personal injury claims that accounts for 49% of Aviva’s claims costs and threatens to push prices skyward, and which needs urgent action.”

The insurer said one out of every nine injury claims it receives was “tainted” with fraud – without being clear whether fraud was actually proven.

Aviva cited a survey of 2,000 people it commissioned from Censuswide which found overwhelming public support for the government reforms. It said “the vast majority (85%) of Brits believe that Britain has a compensation culture, with almost nine in ten (88%) saying that too many people see compensation as an easy way to make cash”.

Further, it said that half of people were unaware that in addition to the base legal costs, claimant lawyers could deduct up to 25% of the injured party’s compensation as a success fee. “Aviva’s research shows that 85% of people believe lawyers are paid too much – and only 3% say they are paid too little.”

Aviva said that it made a £6 pre-tax operating profit on an average £377 premium, with the rest made up of £48 in marketing and operational costs, £35 in insurance premium tax and £287 in claims. Of that, almost exactly half (£141) was attributed to third-party personal injury.

Aviva also called for the government to introduce a threshold to determine whether a claim was eligible for cash compensation, and that for claims above the threshold, damages should be awarded by reference to a transparent tariff.

Finally, APIL said that in the new draft of the SRA Handbook, published as part of its consultation on a major rewrite of the rules, the current rule which bans solicitors from cold-calling members of the public was omitted.

President Neil Sugarman said: “Most solicitors would not dream of cold calling but we must legislate for those who would.

“We are currently in the middle of an epidemic of cold calling for personal injury claims which exploits vulnerable people. It is tasteless and intrusive. It generates the false perception that obtaining compensation for injuries is easy, even when there is no injury. It brings our whole sector into disrepute, and people hate and condemn the practise.

“We at APIL have consistently called for claims management companies to be banned from cold calling for personal injury, in order to raise the bar to reflect what – quite rightly – is expected of solicitors.”

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