People who use our civil justice system to claim damages can come in for a bit of flak. Some in the insurance industry say vast numbers of claims are exaggerated or even fraudulent. Even by making such a claim, they suggest, you are fuelling the country’s out-of-control ‘compensation culture’ which is pushing up premiums and hitting everyone in the pocket.
The supporting evidence for this is weak. The government’s own data suggest that the number of us making claims is falling fast. Motor injury claims, the largest single source, fell by 17 per cent over the last year alone. This is reversing much of the growth generated by the 1999 Access to Justice Act, which opened up the justice system to ordinary people via no-win, no-fee agreements in most civil court cases.
Meanwhile, the figures on fraud come from the insurers themselves. They therefore have some incentive to inflate the stats and then say the government should help get the situation under control by restricting our ability to make claims in the first place.
Transparency over any industry numbers used in public policy making is always welcome, not least for hard-pressed consumers who have been confronted for many years with the implication that if they claim, they are directly responsible for higher prices. We will see whether or not the reverse will prove to be true as claims incidence continues to fall, although like most of our major household bills, such as council tax, what goes up very rarely comes down.
This is partly to miss the point, however. We have somehow got things back to front. The purpose of insurance of any type is not to be cheap but to be effective. Cost matters, but so does service quality. A market that competes almost entirely on price therefore may not be working in the consumer interest.
We buy insurance to help us manage the everyday risks we take when getting behind the wheel of a car, running a business, owning property or going on holiday. Above all, we buy it because we might need it if something bad happens to us, our family or a third party.
In some cases it is also mandatory. The 1930 Road Traffic Act made motor insurance compulsory, and while road safety is better now, the core rationale for such policies remains the same. They are there to help put us back together if we get hurt. Dealing with damage to vehicles or other property matters too, but is far less important than physical or mental injury.
Car insurance is mostly bought on vis the lowest price – at least for those savvy customers who shop around – but that means that in order to protect their profits, some insurers actively discourage claims being made. The main way of achieving this is through the no-claims bonus, which is really a small rebate for not actually using the product at all.
It is not the only way. Complex claims processes and casting doubt on both claims and those who make them has had an impact too. New research from YouGov shows that one in three UK adults who could have made a civil claim in the past chose not to. Top of the reasons for this are 51 per cent saying it’s not worth the hassle, 39 per cent worrying about losing their no-claims bonus and 13 per cent not wanting to be part of the ‘compensation culture’.
Weaponising the language of claims has regrettable consequences. Just last week, a national newspaper bemoaned the “bumper payouts” some claimants were getting and the impact this would have on insurance premiums. Only later did the article mention that such levels of compensation are only for “those who suffer life-altering injuries.” Note to editors: a serious injury is not a lottery win.
It is time for honest consumers and for those who represent them to fight back. We should call out bad behaviour, be it in the financial services sector or the claimant sector. We all get annoyed by nuisance calls. Frivolous claims of any sort should be weeded out. But there is nothing wrong with making a legitimate claim and there are plenty of organisations out there, including charities and not-for-profits, who can help people get what they deserve.
The civil justice system is there to support the genuinely wronged, giving them fair compensation and highlighting ways in which negligent behaviour can be improved, be it in the workplace, in hospitals, on the roads or anywhere else. Better co-operation between those on all sides of the argument will help protect the consumer interest and improve trust in the wider insurance sector.
Above all, we should see a right of redress as something to be celebrated, not ashamed of. It is the mark of a civilised society, not of a compensation culture.