Does the UK have a compensation culture?

Mathew Kiff, corporate team leader, BHIB Insurance Brokers

“Essentially the system that we’ve got in place rewards too many people who are submitting fraudulent and inflated claims. It’s got to be addressed and the Civil Liability Act is a good step in the right direction. 

“Part of the Act states there has to be medical evidence for whiplash claims to be settled and it also introduces an online portal for claimants to submit claims themselves, which cuts out lawyers and associated legal costs. So, it will be more difficult to inflate those claims. 

“The definition of whiplash is going to be expanded to include injuries associated with the neck, back and shoulders. But it doesn’t include things like post-traumatic stress, elbows or knee injuries. We might see a shift in claims towards those areas, as well as longer-term injuries which fall outside the portal as the tariff limits are up to 24 months.

“Lawyers who have operated in this area are likely to diversify. We might see increases in employers’ liability and public liability (EL/PL) claims coming through, as they shift focus on to something else where they might be able to make a profit.

Claim management companies (CMCs) are likely to move into the space left by the lawyers, especially if consumers don’t have the confidence in the online system, so it’s imperative that the system is properly tested and fit for purpose in order for it to have the desired impact. We will also see insurers really pushing First Notification of Loss to their customers, to capture any third parties as quickly as possible, and we are firm advocates of this.

“We really need to challenge the UK’s compensation culture. The system rewards too many people who submit fraudulent and inflated claims, along with CMCs and injury lawyers, at the expense of honest consumers. This is more prevalent in the UK than in other major economies and other countries already have similar systems in place.

“Insurers are doing great work to tackle fraud and we are seeing more custodial sentences handed out – punishment fitting the crime and enforcing that it’s no longer acceptable. If they feel there is a claim that needs to be defended, insurers will defend it and take it to court. We’re seeing that more and more.”

Calum McPhail, head of liability claims, Zurich

“It was clear that our current compensation system was failing. This is not a myth. It was failing too many genuine and honest claimants who had a right to access fair, proper, and timely compensation. 

“People have long believed they can exploit the system with exaggerated and fraudulent claims, seeing it as a “victimless crime” as it is the insurer who pays. Ultimately, the price is paid by millions of honest customers through higher insurance premiums and rising prices, as well as increased costs to local authorities and the NHS.

“We can draw upon a number of case studies which demonstrate how unscrupulous individuals and claimant lawyers with vested interests were routinely exploiting the compensation system.

I recall one case where a Zurich customer reported that they were involved in an accident, advising our investigators that they had accidentally pressed the accelerator instead of the brake, losing control of their vehicle and colliding with a fence. The customer advised us that there were three other occupants in the vehicle who all submitted claims for whiplash injuries.

“However, two independent witnesses to the incident contacted us to advise that only the driver was in the vehicle at the time of the accident. The claims submitted were deemed to be manufactured and, therefore, fraudulent.

“Despite bringing our concerns to the attention of the claimants’ solicitors, court proceedings were issued for one of the claimants, which we instructed our solicitors to defend. Further to the two independent witnesses’ evidence, the litigated claimant filed a notice of discontinuance shortly after. We issued contempt proceedings against the parties involved. Further intelligence searches undertaken revealed that the claimants had links to other accidents in which there were suspicions of fraud.”

Samantha Ramen, director of market and public affairs, Keoghs

“The whole compensation culture does exist. We are in a place now where all the adverts in the media are making it very clear to people that it is easy to make a claim, or to get somebody to make that claim for them, and they can get some money.

It has fuelled this culture and even though there have been reforms – with Laspo [Legal Aid, Sentencing and Punishment of Offenders Act 2012] and so on – there is still quite a lot of money within the system that claimants’ representatives are able to access.

“Laspo was well received and it is something that we pushed very hard for, and that I, personally, pushed hard for.

I was at the ABI at the time, so did a lot of work to get Laspo across the line. But I just don’t think that it tackled the inherent issue, which is that there’s still money to be made by the unscrupulous. And we will continue to see claims being presented until that changes.

“When it comes to fraudulent claims it’s never crystal clear. There’s been a lot of debate around what is a fraudulent claim. And the claimant community has disputed the figures that the insurers have quoted in terms of how much fraud we are actually seeing. It is difficult to prove fraud and there will be a lot of hidden fraud. Exaggerated claims are a perfect example because they are not 100% true and honest claims, but elements of the claim will be true.

“There’s no black and white when it comes to fraudulent claims, it really does fall onto a spectrum. And that’s one of the big challenges from a policymaker’s perspective. The government wants

the numbers and insurers have been criticised for not being clear on what they believe to be fraud, but actually it’s an incredibly complex issue and it’s not always clear.”

Mark Hemsted, partner, Clyde & Co

“We spend an awful lot of time trying to assess claims where no injury whatsoever has been suffered and insurers have very sophisticated fraud and counter-fraud departments.

But is it still possible that some slip through the net? Of course it is. There are the staged incidents and accidents where people weren’t actually in the cars, which is what I call hard fraud. Those are the claims, if proven, which are obviously fraudulent. 

“But if you step back you realise that the frequency of personal injury claims in the UK is much higher than, for example, the rest of Europe. Is that because people are just aware of their entitlement to claim for whiplash?

Is it hard fraud or is it people being “enterprising”? Where they did suffer an injury and have a genuine accident, but they exaggerate the extent of it to win a higher settlement. 

“Clearly in the UK there are significant numbers of fraudulent claims. We’ve almost reached a point now where the rabbit is out of the hat. There is an increased awareness of the entitlement to bring a claim if one is injured, whether by public awareness or in terms of publicity and adverts by claims management companies. But clearly it has also brought a great deal of fraud into the system. 

“The claims that I personally deal with are those where people have genuine injuries. But equally we have a large fraud team here dealing with claims where people are either exaggerating or fraudulently misrepresenting the fact they had an injury. 

“This exaggeration aspect could be something we see more often, once the reforms come in.”