The Business of compensating victims of collisions and crashes

The Business of compensating victims of collisions and crashes

In 2011 (and for the last decade), it has been common practice for there to be a price on the head of a person who has been injured.

The cyclist who is licking their wounds at home or in hospital is a marketable commodity.

The former home secretary and justice minister, Jack Straw, displayed apparent ignorance of the practice which he described as ‘a racket’ in a radio interview in June 2011. He called it the insurance industry’s “dirty secret”.

The blunt truth is that many law firms pay very substantial sums to insurers to be on panels which receive referrals; that is the names and contact details of people who have been or may have been injured. They pay again for individual cases. Those payments may be direct or they may be through the medium of a so-called claims management company (CMC). The going rate is up to £800 per case. It’s not just the details of the insurer’s own policy holder which finds its way into the system; the identification of the other party, such as a cyclist, also seems to leak out too.

The whole industry is so incestuous that right hand frequently does not know what left is doing. Take the case of a Saturday broadsheet newspaper published 23rd and 30th July 2011.

The motoring section’s cover story was entitled “Stop cash for crashes”. The article stated “This compensation cash machine is having a disastrous effect upon our insurance premiums: according to the AA, in the first four months this year they shot up by a record 40{9b4a2c8832b2482ca7eb937f6bfa363e1f3f7cb05e1b42927da41c9eadde8c32}”

A few pages later, another columnist wrote, in a reply to a reader who wondered how a minor knock had turned into a personal injury claim: “The other party has taken advice from some personal-injury scavenger”.

Curiously, in the previous week’s edition appeared an advertisement for the paper’s Legal Services, offering readers a ‘simple and cost effective way of accessing legal advice on personal injury claims’, in association with a law firm. “If you have suffered from a personal injury through no fault of your own you may be entitled to compensation” read the advertisement.

One has to wonder the extent to which money is changing hands here, between the newspaper (which the following week ran the Cash for Crash banner) and the linked legal services provider.

Meantime, the AA, (source of the insurance premiums hike quote) has a commercial arrangement with another legal enterprise for them to pursue claims which pass through the Association’s offices.

The reporter was clearly so bewildered by the mess that in his sidebar to the article, he managed to get the whole thing the wrong way around “The Government…will ban referral fees paid by car insurance companies to claims solicitors…” If an investigative journalist cannot grasp the facts, it’s hardly surprising accident victims are confused by what’s happening to their data.

The other way that work finds its way to an associated lawyer is through something called ‘before the event legal expense insurance’. Anyone who has bought a policy of home or car insurance will have been offered (probably as a ‘delete option’) insurance cover in respect of legal costs that would be incurred in the event of involvement in some form of dispute. The premiums are so low –typically £20 or less – that most policy holders, forking out several hundred pounds for the substantive cover, simply do not question it.

The reasons the premiums are low is because they are subsidized by the referral fees paid by law firms to buy a place on a panel for the chance of acquiring work. If the policyholder needs legal representation, the insurer will fight tooth and nail to impose a panel lawyer upon the potential claimant: arguably in breach of European freedom of choice legislation.

While a person who has, consciously or not, purchased BTE legal expense insurance ought not to be surprised in this age that his representative will be appointed for him by the insurer, someone who simply reports a damage only accident may wonder why the claims management companies are taking such an interest. The details will have been moved sideways within the insurance company and sold on to a CMC which will then make its money by encouraging the individual to claim and selling the claim on to the lawyers.

Lancashire Police were for a time handing out Accident Information Folders sponsored by a motoring organization. These included a free helpline phone number. Clients may assume such a number must be reputable because the Police had provided it in a medium also bearing the County Council’s endorsement.

The fact is, that the same motoring organization was receiving one of the highest referral fees in the business at the time from a national law firm. It’s unclear what, if anything, Lancashire Police may have received in the process.

These activities are, however, the respectable end of the market. Details of injured victims leak out of the NHS, the Police, motor body repair businesses and car hire companies. News of an injury travels fast down the grapevine. There have been more blatant means of claims capture; black cabs in several northern towns were, for a time, emblazoned with advertising inducing the injured to ‘sell your claim’ ; the going rate being about £200.

So, what does all this mean for the cyclist who has sustained damage or injury as a result of a motorist’s antics?

1) Beware an approach out of the blue without any obvious link. Someone’s likely to be seeking to profit from misfortune.
2) Equally, be wary of an approach from the insurers of the other party offering an immediate settlement. This is not likely to be done for anyone’s interests but their own.
3) A law firm which has had to pay anything of the order of £800 to secure work will have to recoup that out lay somewhere along the line. One way of doing that is to cut corners in the claim, as in the quality of the staff handling it, leading to a poor settlement.
4) As you only claim once, your most important decision is choice of representation. The Cycle –SOS cycle claims team have been working in this field for over 20 years , are trained in accident investigation and reconstruction and have half a century’s cycling behind them.

© Paul Darlington 07.2011 – Consultant Solicitor