I have been following the recent focus on tackling fraudulent claims.
What about the other side of the coin? Many insurers and their lawyers seek to minimise claims on a strategic basis. The strategy turns out to be to offer the smallest settlement which the insured will accept, not the settlement properly due under the insurance contract.
If fraudulent increasing of claims can result in court action, then surely it must be equally illegal for insurers and their agents to follow a policy of influencing settlements so that they fall short of the claimant's entitlement.
As an expert witness in the construction industry, I see many cases of derisory first offers from insurers followed, eventually, by major settlements. The most extreme in my experience was an initial offer by a major and supposedly reputable insurer which was multiplied more than 50 times in the final settlement which has topped £250,000.
The professional standards committee of my professional body is reviewing international corruption in the civil engineering industry which has been put on the agenda by the World Bank. One of the issues raised has been the misfeasance of contractors falsely inflating claims under their contracts both abroad and in the UK whereas the engineers managing the contracts have a duty to settle claims equitably.
Indications are that claims inflation in this way may be the hidden form of illegal activity which has succeeded the overt corruption of the Poulson era in the 1970s.
I suggest to your readers that on a similar basis the institutional and habitual practice of making derisory initial claims offers followed by some insurers and through their lawyers, without an overriding/professional duty for insurers or their lawyers to settle claims equitably is an equally corrupt system enabling insurers to enhance profits.
Isn't this a practice which the FSA should be investigating or could the industry do something about it on its own?