Motor car insurance policy holders are paying through the nose as a result of costly car accident claims according to the Association of British Insurers, with the industry body reporting that legal fees alone originating from personal injury cases amount to £2.4 million on a daily basis – and car insurance companies are passing the bill along to their customers.
If you’ve ever wondered why it’s such a challenge to find discount car insurance in the UK in the current day and age, insurers will tell you that the main reason behind this is the country’s out-of-control civil compensation system. Insurance providers that find themselves on the losing end of a personal injury lawsuit have to not only pay out compensation for the injured party but also have to foot the legal bill for the winning side’s lawyers, and as insurers generate the cash they use to do business through collecting premiums from customers, they have no choice but to raise car insurance rates in order to stay in the black.
However, critics say that the insurance industry is not completely blameless in this issue. Many insurance providers will sell on the personal details of their customers who were involved in a collision through no fault of their own, thus encouraging the claims management companies and legal firms that purchase these details to entice drivers into making claims against competitors.
Although the practice of selling on personal details, or ‘accepting referral fees,’ as the industry refers to it, is widespread, the few hundred pounds that insurers take in per referral fee does not counteract the increased claim volume across the industry as a whole, and many insurance experts argue that insurers are effectively shooting themselves in their collective feet and then pleading that they have no control over the problem.
As a result, many industry experts, including the ABI, have called for the banning of referral fees through legislation. However, legislation working its way through Parliament to that effect bears several loopholes that may be less than effective in actually preventing insurers accepting cash for customer information.