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Ellman: Whiplash claims inquiry to begin later this year

Industry News : 8 March 2013

It has been revealed that an inquiry into whiplash claims led by the House of Commons transport select committee will begin later this year.

The announcement came from the committee’s chair, Louise Ellman MP, who said the study would focus on how to reduce the number of fraudulent claims whilst ensuring that injured victims of road accidents can still get compensation.

Ellman, Labour member for Liverpool Riverside, told the Association of British Insurers conference on motor insurance that committee members had met to decide on the inquiry.

Furthermore, Ellman added that insurance companies would be required to explain why they do not challenge more claims which they believe to be fraudulent. ‘In the rush to get rid of fraudulent claims we shouldn’t dismiss the possibility that people have a genuine injury,’ she said.

The announcement of an inquiry comes at a time when dramatic changes will soon be hitting the personal injury sector. As well as the Legal Aid, Sentencing and Punishment of Offenders Act coming into action on April 1st , fixed recoverable costs for low-value work will fall by 58% from the end of April.

In addition, consultation will close this Friday on raising the limit in the small-claims court from £1,000 to £5,000. The government has made it known that it intends to drive costs out of the system resulting in lower car insurance premiums.

Managing Direction at LV=, John O’Roarke, has warned consumers that they will not see greatly reduced premiums as a result of the new fixed costs.  ‘[I expect] a 3% reduction in premium, but generally we have already seen reductions in premiums of 12% and I am not hopeful there will be much more to come.’

O’Roarke stated his belief that 50% of whiplash claims were exaggerated or fraudulent, and that premiums would fall by as much as 15% if they could be permanently eliminated.

Furthermore, O’Roake issued a warning to any insurers looking to join with a claims management company, advising them to form an alternative business structure in response to the referral fee ban which will come into effect from next month.

‘CMCs are going to want to run as an ABS as it’s a way round the ban but I am less convinced about the rationale for insurers to go down that route – we have an opportunity to clean up our act.’