Finally, there looks to be good news for motorists insurance premiums as the Transport Select Committee have announced that claimants should have to prove that they have suffered whiplash injuries following an accident. This is a major cause of increased insurance premium costs as Accident Management companies hijack claims and encourage spurious claims for whiplash, extortionate hire car costs and legal fees for claims that would historically have been a fraction of their cost today. MPs also want insurers to be banned from selling any form of customer information and intends to ban them from receiving referral fees for this information, but only for personal injury claims.

According to the BBC News website, Louise Ellman, chair of the Transport Committee, said: “Insurers, solicitors and claims management companies have themselves driven up the cost of motor premiums by encouraging people caught up in road accidents they did not cause to claim for personal injury, car hire, and other legal costs.” “The insurance industry must abandon sharp practices that push up premiums such as passing drivers’ personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms,” she added.

There has been a 70% rise in motor insurance claims in the past six years, the Transport Select Committee pointed out, despite a 23% drop in the number of casualties actual caused by road accidents and that whiplash claims accounted for nearly 70% of all Personal Injury claims (PI as it is commonly referred). However insurers in the cheap motor insurance and cheap 1 day insurance market find it very difficult to defend against these claims as the injuries are currently very much “subjective”.

Louise Ellman also added “The threshold for receiving compensation in whiplash cases should be raised and, if the number of such claims does not fall significantly, the government should bring forward primary legislation to require objective evidence – both of a whiplash injury and of it having a significant effect on the claimant’s life – before compensation is paid”. This basically means prove it or no claim will be paid – which is good news for honest claimants who have a legitimate claim and have nothing to fear but claims farmers will be fighting a lost cause.

Interestingly, the ABI agreed that the payment of referral fees should be banned altogether, but to all organizations and not just to insurers and stated that customers are fed up of paying high short term car insurance premiums to line the pockets of “ambulance chasing lawyers and claims management companies”. Nick Starling of the ABI was quoted as saying “It is absolutely critical that Britain’s whiplash epidemic is tackled once and for all and the select committee’s acknowledgment that the bar to receiving compensation for whiplash is too low is a step in the right direction,”

This is not a new concept – In the past year the insurance industry and its compare short term motor premiums have come under increasing scrutiny:

• March 2011 – the TSC accused the insurance industry of encouraging claims through the payment and acceptance of referral fees.
• June 2011 – Jack Straw described this system in the insurance press as a “dirty secret” and a “racket”, in which insurers sell information about customers who have been involved in accidents to solicitors who then encouraged them to make claims.
• September 2011, the Office of Fair Trading (OFT) began looking at why motor premiums have been rising fast The government also agreed to change the law to ban referral fees in personal injury claims
• October 2011 – the Parliamentary Justice Committee of MPs said the payment of such fees only encouraged organisations to sell data without permission, and said that any impending ban should apply to all referral fees paid by lawyers to third parties
• December 2011, the OFT launched a full investigation into car insurance costs, including the cost of hire cars and accident repairs.

The Lords are scrutinizing the Legal Aid, Sentencing and Punishment of Offenders Bill, which has been amended to put in place the ban on referral fees relating to personal injury cases.

The Transport Committee’s report concluded: “We recommend that the government send a clear message to the insurance industry that it expects the data protection legislation to be fully respected and we echo the recommendation of the Justice Committee that the stricter penalties for breaching the [Data Protection] Act, passed by Parliament in 2008, should be brought into force,” the MPs added