FOXY Review

We're all road accident victims

The BBC Panorama programme (11 July 2011) explained how accident claims affect female car insurance premiums. But whilst it's tempting to link recent insurance premium rises to fraudulent claims, there's a lot more to this subject than meets the eye...

This is because the insurance industry operates within a culture of 'you scratch my back and I'll scratch yours' when it comes to accident handling services. A whole industry is seemingly rubbing its hands together in financial glee whilst we all suffer the trauma and the genuine hardship associated with being a victim of a stressful road accident.

According to the Daily Mail (James Salmon, 8 June) insurers are earning an estimated £4.7 billion a year in referrals from lawyers and claims handlers who target motorists after accidents.

The figures speak for themselves as follows:

For every £100 paid in motor insurance premiums, £10 goes to personal injury claim lawyers, according to the Association of British Insurers
Uninsured drivers add £30 a year to the average policy
Fraudulent claims add £40 a year to the average policy - 122,000 were detected last year, worth £410 million
Legal fees to settle personal injury claims add £41
Credit hire firms (they loan replacement vehicles) add £44
Almost half of motor insurance claims pay for whiplash claims
the UK has four times more whiplash injury claims than any other country according to the AA
Payouts for personal injury claims have doubled from £7 billion to £14 billion in the last ten years.

In a nutshell our personal road accident details are being bought and sold without our knowledge by a variety of firms who are all looking to make money out of our misfortune. These can include insurers, personal injury lawyers, credit hire companies, garages, claims handlers and even the police.

This comes about because accident victims may be able to claim compensation for an injury and hire a replacement car while theirs is being repaired; that bill will then be passed to the guilty party's insurance company. And when it seems to be a simple process, the temptation to claim and offset one's high insurance premium can be very attractive for many.

And if a motorist has an accident which they are not to blame for (often referred to as a 'no fault accident'), their insurance company can sell their details to legal firms (for a typical referral fee of £750*) who will then take this up with the guilty third party.
*as quoted in the Government's Jackson Report

How firms earn referral commissions after accidents

Here are the main ways firms earn referral commissions after accidents and which we motorists end up paying for in our ever increasing insurance premiums.

Insurance companies have a panel of personal injury lawyers, credit hire companies and 'approved' garages willing to pay them for the work they pass on to them. When one of their insured drivers is involved in an accident, it will sell their details to a lawyer for a typical £750 per case and £300 to a car hire company*.
*according to CS2 Lawyers

The accident victim will then be contacted by the lawyer or the credit hire company direct.
Personal injury lawyers are getting rich because a quarter of road traffic accident claims include a personal injury claim in England. 80 per cent of these include whiplash claims which can be difficult to disprove even though we know that this level is unreasonably high compared to other countries (without a referral payment system like ours).

For every £1 that insurers pay to accident victims as compensation, a further 87p is paid out to personal injury lawyers and associated legal costs add £2,100 to the cost of each claim.
A growing number of claims handlers offer victims a lawyer and may refer you to a credit hire company. They then pocket referral fees from these firms and some hound accident victims with nuisance calls and spam others with the promise of big payouts after a motor accident.
Credit hire companies provide replacement vehicles to accident victims which they then charge to the insurance company of the person at fault. Fair enough. But using a credit hire firm is adding an unreasonable average of £1,500 to a claim and £44 to every driver's motor insurance premiums*as a result of several tricks, such as providing replacement cars of a higher specification.
*according to Allianz and the AA
Many accident recovery services, garages and bodyshops pay to be featured on an insurer's panel of 'approved' garages. And because they are seen to be part of the insurer's network, we think they are going to be some of the best or that we don't have a choice here. Whereas the truth is that the insurer's panel may not necessarily be the best and yes, we do have a choice (although that choice does appear to allow some insurers to charge us a supplement in their policy smallprint for using a garage that isn't part of their network).
We are also told that some garages earn more through referral fees than doing the actual work! They can earn between £400 and £450 for each injured person in the car if they pass on the details to a claims handler. And they can also earn £150 for simply passing details to credit hire firms for replacement cars.
A specialist area, medical teams are expected to pay commission (c£60) to insurance companies for a lead and then charge solicitors a fee (in the region of £200) for medical reports to diagnose an injury and its consequences.
Finally even the police are involved as they often earn referral fees from contractors to tow vehicles away. More than 50,000 vehicles were reportedly towed away at police orders in 2008 and 2009.

Who can women drivers trust?

An independent report about all this was commissioned by the Government and completed by Lord Jackson who recommended a complete ban on referral fees. Earlier this year the Government said it would press ahead with certain measures but it hasn't banned referral fees yet, simply recommended that they are made more transparent.

All in all, this is yet another sorry tale of bad practice in an industry that leaves motorists feeling deeply suspicious of the genuinely good garages and bodyshops as well as footing the bill for all this of course.

And yet there are many Female Friendly garages and accident repair bodyshops out there offering well intentioned services that do make it easier for motorists to cope at times of considerable stress. It's just a case of having ethical standards and knowing who to trust.

Foxy ladies are also encourage to shop around for motor insurance quotes before accepting this year's increase in premium. Some insurers will charge you more to use a bodyshop that is not part of their own repair network. Where in doubt FOXY advises women to check that the bodyshop they choose is either a BSI Kitemark (PAS 125) licensee, a member of the VBRA (Vehicle Builders and Repairers Association) ie following the only OFT fully approved Code scheme or operating to manufacturer approved standards.

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Join FOXY Lady Drivers Club to enjoy a female friendly accident assistance service where members and their families can get fast and free advice after an accident but before committing to any one course of action which might not be in their ultimate best interests.

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