UK businesses and local authorities continue to be hit by the costs of dealing with the UK's compensation culture, and many of the causes of the problem are not being addressed by the government's new Compensation Bill, according to an annual survey by Aon.
According to the survey, businesses and local authorities would like to see greater government consultation with industry and the public sector, with a view to introducing tighter limits on compensation awards and more ambitious reform.
This would go further than the proposed legislation to address what organisations perceive to be the main drivers of the compensation culture: the growth of "no win, no fee” legal services (84%); media advertising on the part of “claims farmers” (70%); and reluctance among insurers to defend claims due to the lower costs of settling out of court (42%).
Aon's survey reveals that 86% of the organisations questioned were detrimentally affected by compensation culture this year, either directly or through rising insurance costs.
Many businesses have experienced no reduction in compensation claims received since 2004, and only 10% have seen a decrease in the overall cost of claims. One in three of the organisations surveyed (36%) believes they are still receiving fraudulent claims.
66% of UK businesses and local authorities strongly agree that if the compensation culture is allowed to continue, it will place an unsustainable burden on industry, commerce and public services.
Aon''s survey also revealed that over two thirds of the MPs interviewed acknowledged the negative impact that the UK compensation culture is having on the performance of business.
David Roberts, a managing director in Aon's risk management services division, said: "Our survey highlights that the proposed legislation does not go far enough. It currently does little to address what businesses perceive to be the main drivers of the compensation culture.
"We would encourage fundamental reform of the no-win, no-fee legal systems and more detail on the tighter controls envisaged for advertising on the part of claims farmers. We would also welcome a more prescriptive approach to the role and remit of the proposed claims management services regulatory body."