Former home secretary and justice secretary, Jack Straw, recently gave evidence to the Transport committee during its car accident claim cost probe, calling claims management companies ‘parasites’ within the personal injury compensation system.
Mr Straw talked about the rising car insurance premium problem in the UK, which has been attributed to the rising costs of personal injury claims associated with motor accidents. The former home secretary remarked that, given that premium increases, some leveling off should be occurring currently, yet this provided a complete lack of complacency in regards to the current situation.
Mr Straw said he was clear about was that £2 billion out of the £9 billion in premium income is due to costs generated by what he referred to as ‘parasites’ within the system. There are statistical correlations and connections between the level of premium and the density of claims management firms by region, he added, remarking that he would not be surprised to discover that claims management companies exist primarily to generate artificial claims volume.
The relentless pressure these firms put on the industry are demonstrated by the number of text messages sent out by them on a daily basis, Mr Straw also said, calling the behaviour almost criminal in its scope. The problem needs to be taken with the utmost seriousness by the committee, Straw added, as it is compulsory to have motor insurance.
Such practices have led to quite significant premium price increases for the honest, law abiding driver for absolutely no benefit, he remarked. However, according to Spencers Solicitors director John Spencer, banning referral fees may not result in actually rectifying the situation unless the government adopts a more holistic approach to industry reforms in general.