Insurers say there has been a leap in fraud detection since MoJ website was launched, while litigation is growing for cases that fall outside portal as legal costs are higher
Motor insurers using the road traffic accident (RTA) portal say they have detected a huge rise in fraudulent claims.
Allianz claims director Graham Gibson said: “What we have seen is a huge increase in fraud; claims passed to the fraud team have risen from 7% to 15% – and 80% of that 15% immediately walk away at the first serious challenge.”
The portal was set up by the Ministry of Justice in April last year to help settle motor personal injury claims quickly and cheaply.
Solicitors put personal injury claims through the portal’s user-friendly website and insurers then have a 15-day deadline to accept or refuse liability.
Insurers say that since the portal was launched:
- There has been a big increase in the detection of fraud. This could be because fraudsters have ramped up bogus claims believing that insurers won’t have enough time to vet them in the portal’s shorter time period. Alternatively, it could be because insurers have improved their fraud detection abilities and are catching out more tricksters.
- 80% of insurers say claims settlement times have reduced, saving money on legal costs; 20% say it is too early to tell. Some insurers said these savings have been eroded by law firms deliberately chasing money-spinning cases that fall outside the portal.
- 70% of survey respondents agreed the portal had generally improved working relationships between claimant solicitors and insurers.
- Some law firms are ramping up fees for cases pre-dating the portal and for cases that have dropped out of the portal, because, for example, the claimant law firms believe a case is too complicated. Law firms get fixed fees for cases in the portal, but once a case drops out there are no fixed fees and legal costs can soar.
- Nine out of 10 insurers said they were satisfied or very satisfied with the portal.
QBE head of motor claims Tom Helm said: “We initially saw an overall drop in litigation at our own company, but we now seem to be seeing litigation picking up for those claims that fall outside of the portal.
“That could see us back to where we were before the protocols were introduced.”
Insurers also suspect some law firms put speculative claims into the portal to get the initial £400 fixed fee offered, with no intention of pursuing the claim. Insurers call these law firms “the 400 club”.
All respondents broadly supported extending the portal and pre-action protocol to cover both higher value RTA and employers liability and public liability (EL/PL) claims, although they warned that there would need to be some allowances, for example over deadlines and medical reports allowed by the protocol.
Partner and national head of casualty at DAC Beachcroft Tom Baker said: “The disproportionate nature of claimant costs is as prevalent in EL/PL claims as it was in motor.
“While PL claims will inevitably pose more of a challenge to defendants and insurers, there are ways and means of shaping the process.
“This will help us to move away from the current unacceptable situation where, for example, the NHS paid £200m to claimants’ lawyers for compensation cases in 2010-11 – around three times more than it paid its own lawyers.
“Frankly, there can be no justification for excluding simple “slippers and trippers” from a wholesale review of pre-action procedure.”
The insurers surveyed by law firm DAC Beachcroft were Ageas, Allianz, Aviva, AXA Insurance, NFU Mutual, QBE European Operations, RBS Insurance and Zurich Insurance as well as two other anonymous insurers.
We say …
● Most insurers using the portal have been reluctant to invest in software upgrades that would let them analyse the claims better and catch more fraud, as they were unsure of the portal’s future and didn’t want to spend money unnecessarily. Now the portal has proven its worth, it is time to invest.
● Fraudsters are starting to move towards casualty business as insurers get tough on motor fraud. If the portal is extended to include employers’ and public liability claims, insurers will need to step up their fraud response in these areas too.