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From today's Times:
Insurance 'racket' exposed: 'dirty secrets' helping the cost of motoring to rocket
Motor insurance companies have been selling on the personal details of their customers to claims-management companies and “ambulance chasing” lawyers.
Insurers have been trading in customer details, in the knowledge that this has contributed to a dramatic rise in claims, particularly for personal injury, and increasingly widespread instances of fraud, concludes a damning investigation by Jack Straw, the MP for Blackburn and former Justice Secretary.
Insurers fuel the claims, even though they force up their costs because the referral fees provide vital revenue — between £200 and £1,000 per name.
At the heart of the scandal are personal injury claims, the cost of which has doubled in ten years from £7 billion to £14 billion. This is despite a fall in the number of road accidents involving personal injury. The increased costs are then passed on to motorists in the form of higher premiums.
Many of the claims are for whiplash, an injury that no scan or X-ray can detect. The cost to the insurance industry of claims for whiplash is £2 billion, yet the cost to the NHS of treating whiplash injuries is just £8 million.
The scandal came to light as a result of investigations by Mr Straw into complaints from his constituents. He confronted two big insurers, which admitted that they were releasing personal data to claims companies. Mr Straw discovered that his constituency was one of many hotspots where insurance costs had soared. Insurance industry analysis shows a link between hotspots and the claims companies in the area. “This is not a system; it’s a racket,” he said. “The sooner it’s ended, the better it will be for the law-abiding motorist.”
He has passed on his findings to Christopher Graham, the Information Commissioner, who is investigating possible breaches of data protection law. Louise Ellman, who chairs the Transport Select Committee, said she would be raising the issue in Parliament. “This makes a strong case for a ban on referral fees,” she said.
As part of a wide-reaching probe into the “dysfunctional” market for personal injury insurance, Mr Straw has established that motor insurance companies have been selling on the personal details of customers to claims management firms and “ambulance chasing” lawyers. His report also reveals that:
• Unscrupulous advisers have been exploiting lax rules on proving “whiplash” injuries to drive a sharp increase in claims and payouts.
• Insurers, many trading at a loss, have ramped up premiums for households in areas where personal injury claims, even legitimate ones, are rife.
• The police and hospitals have been collecting fees for passing on insurance customers’ personal contact details.
Writing in The Times today, Mr Straw calls for restrictions on the trading of individuals’ personal information. He says that the rules on whiplash should be tightened so that insurance claims can be made only when there is real evidence of injury.
He also says that claims management companies should be much more tightly regulated and he demands a ban on so-called referral fees, where companies from insurers to roadside rescue businesses charge for passing on customer details.
But in comments likely to prompt anger among hard-pressed householders who have seen their car premiums rocket by almost one-third this year alone, Mr Straw reveals how an industry executive admitted their role in passing on details of potential claimants.
He writes: “I went to see the Association of British Insurers (ABI), and senior executives of two of Britain’s largest motor insurers. I asked them. A long pause, a look of embarrassment. “Then, said one of these executives: ‘This is the industry’s dirty secret. It’s we, the insurance companies, who sell on this personal information.’”
Speaking to The Times, Mr Straw said: “It is gobsmacking. The insurers are complicit in something that is against their interests. In my view, what they are doing, in principle, is contrary to the spirit of data protection.”
Mr Straw has written to Christopher Graham, the Information Commissioner, with his concerns. The commissioner, who has recently been granted wider powers, has agreed to examine whether consumer rights are being abused.
Mr Straw said that wholesale reform of the personal injury market was urgently required. “It is the economics of a madhouse, where the law-abiding public is penalised,” he added.
Mr Straw’s findings have sparked a call by Louise Ellman, the chairman of the Transport Select Committee, for a parliamentary debate on the costs of the car insurance market, specifically to involve a discussion of his report. They also prompted the insurance industry to renew its call for a complete ban on referral fees.
Nick Starling, the director of general insurance and health at the Association of British Insurers, said that his members were caught in a “pernicious cycle”. He told The Times: “Everyone is doing this; it’s not just the insurance industry.” The providers of replacement vehicles, garages, hospitals and the police were all profiting from the referral fee system, Mr Starling said. “The ABI’s clear position is that referral fees should be banned. but the industry can’t do it by themselves,” he added.
Mr Starling dismissed as “nonsense” reports that insurers were receiving £4.7 billion in referral fees each year.
Mr Straw was inspired to carry out his investigation after voters in his Blackburn constituency began to complain of sharply increased car premiums. His close friend, Phil Riley, was also bombarded with phone calls and text messages urging him to pursue an injury claim after an accident, despite him being unhurt.
Insurance 'racket' exposed: 'dirty secrets' helping the cost of motoring to rocket
Motor insurance companies have been selling on the personal details of their customers to claims-management companies and “ambulance chasing” lawyers.
Insurers have been trading in customer details, in the knowledge that this has contributed to a dramatic rise in claims, particularly for personal injury, and increasingly widespread instances of fraud, concludes a damning investigation by Jack Straw, the MP for Blackburn and former Justice Secretary.
Insurers fuel the claims, even though they force up their costs because the referral fees provide vital revenue — between £200 and £1,000 per name.
At the heart of the scandal are personal injury claims, the cost of which has doubled in ten years from £7 billion to £14 billion. This is despite a fall in the number of road accidents involving personal injury. The increased costs are then passed on to motorists in the form of higher premiums.
Many of the claims are for whiplash, an injury that no scan or X-ray can detect. The cost to the insurance industry of claims for whiplash is £2 billion, yet the cost to the NHS of treating whiplash injuries is just £8 million.
The scandal came to light as a result of investigations by Mr Straw into complaints from his constituents. He confronted two big insurers, which admitted that they were releasing personal data to claims companies. Mr Straw discovered that his constituency was one of many hotspots where insurance costs had soared. Insurance industry analysis shows a link between hotspots and the claims companies in the area. “This is not a system; it’s a racket,” he said. “The sooner it’s ended, the better it will be for the law-abiding motorist.”
He has passed on his findings to Christopher Graham, the Information Commissioner, who is investigating possible breaches of data protection law. Louise Ellman, who chairs the Transport Select Committee, said she would be raising the issue in Parliament. “This makes a strong case for a ban on referral fees,” she said.
As part of a wide-reaching probe into the “dysfunctional” market for personal injury insurance, Mr Straw has established that motor insurance companies have been selling on the personal details of customers to claims management firms and “ambulance chasing” lawyers. His report also reveals that:
• Unscrupulous advisers have been exploiting lax rules on proving “whiplash” injuries to drive a sharp increase in claims and payouts.
• Insurers, many trading at a loss, have ramped up premiums for households in areas where personal injury claims, even legitimate ones, are rife.
• The police and hospitals have been collecting fees for passing on insurance customers’ personal contact details.
Writing in The Times today, Mr Straw calls for restrictions on the trading of individuals’ personal information. He says that the rules on whiplash should be tightened so that insurance claims can be made only when there is real evidence of injury.
He also says that claims management companies should be much more tightly regulated and he demands a ban on so-called referral fees, where companies from insurers to roadside rescue businesses charge for passing on customer details.
But in comments likely to prompt anger among hard-pressed householders who have seen their car premiums rocket by almost one-third this year alone, Mr Straw reveals how an industry executive admitted their role in passing on details of potential claimants.
He writes: “I went to see the Association of British Insurers (ABI), and senior executives of two of Britain’s largest motor insurers. I asked them. A long pause, a look of embarrassment. “Then, said one of these executives: ‘This is the industry’s dirty secret. It’s we, the insurance companies, who sell on this personal information.’”
Speaking to The Times, Mr Straw said: “It is gobsmacking. The insurers are complicit in something that is against their interests. In my view, what they are doing, in principle, is contrary to the spirit of data protection.”
Mr Straw has written to Christopher Graham, the Information Commissioner, with his concerns. The commissioner, who has recently been granted wider powers, has agreed to examine whether consumer rights are being abused.
Mr Straw said that wholesale reform of the personal injury market was urgently required. “It is the economics of a madhouse, where the law-abiding public is penalised,” he added.
Mr Straw’s findings have sparked a call by Louise Ellman, the chairman of the Transport Select Committee, for a parliamentary debate on the costs of the car insurance market, specifically to involve a discussion of his report. They also prompted the insurance industry to renew its call for a complete ban on referral fees.
Nick Starling, the director of general insurance and health at the Association of British Insurers, said that his members were caught in a “pernicious cycle”. He told The Times: “Everyone is doing this; it’s not just the insurance industry.” The providers of replacement vehicles, garages, hospitals and the police were all profiting from the referral fee system, Mr Starling said. “The ABI’s clear position is that referral fees should be banned. but the industry can’t do it by themselves,” he added.
Mr Starling dismissed as “nonsense” reports that insurers were receiving £4.7 billion in referral fees each year.
Mr Straw was inspired to carry out his investigation after voters in his Blackburn constituency began to complain of sharply increased car premiums. His close friend, Phil Riley, was also bombarded with phone calls and text messages urging him to pursue an injury claim after an accident, despite him being unhurt.
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