Insurer says this and other changes could cut £1.4bn of excess motor claims costs
Aviva has called for a complete ban on motor claims referral fees as part of a proposed three-part remedy for UK compensation culture.
The insurer has claimed in a new report that banning referral fees outright, compensating minor whiplash claims with treatment rather than cash, and increasing the small claims track limit to £5,000 from £1,000 will cut excess motor claims costs by £1.4bn.
This in turn would shave £50 from the average annual premium, the insurer said in its report, titled Road to Reform: Tacking the UK’s Compensation Culture.
The Legal Aid, Sentencing and Punishment of Offenders Act, which came into force in April 2013, banned referral fees between lawyers, insurers, claims firms and others.
But referral fees are still commonly paid for replacement vehicles, repairs and recovery. Aviva said than banning these fees outright would save the industry £200m a year, shaving £7 from the average premium.
Compensating minor whiplash claims with treatment rather than cash would result in the biggest saving of the three proposed remedies. Aviva said it would save the industry £900m, resulting in an average premium reduction of £32.
Raising the limit on the small claims track, which would mean lawyers would only get involved in claims above £5,000, would save the industry £30m, cutting the average premium by £11, Aviva said.
Aviva UK and Ireland general insurance chief executive Maurice Tulloch said: “Motor insurance premiums are at the heart of the focus on the cost of living. If the UK is serious about reducing the cost of motor insurance for the long term, then it is clear we have to address the way we compensate minor whiplash, using rehabilitation only to treat genuine, minor injuries.
“We believe that the current system offers financial incentives for personal injury lawyers, claims management companies and fraudsters, which inflates the cost of motor insurance. Aviva’s recommendations for reform would ensure that genuine, minor injuries are treated while further reducing motor insurance costs and combating fraud for the long term.”
Aviva motor claims director Andrew Morrish told Insurance Times that some companies relied heavily on referral fees and so the report could get a mixed response from the market.
But he added: “I would like to think that at a market level this is a kind of change we would all embrace, particularly if we are genuine about doing the right things for consumers in a lasting way.
“All the money [the industry] makes in claims farming is more than offset by the cost to us all in increased claims.”