Why insurers can’t be trusted to pay fair injury compensation

Some commercial reasons:

  1. Insurance companies are profit-making organisations. Their interests lie in increasing profit by as much as possible in order to reward investors/shareholders and remunerate high-earning CEO’s and directors.  Paying out fair compensation and legal costs does not align with their goal to reduce expenditure and increase profits.
  2. Insurance premiums have increased by over 20% for each of the last 2 years despite the number of claims falling by around 10% and despite the cost of claims falling by around 60%.
  3. Insurers make pre-medical offers to people involved in accidents all the time. Without requiring any evidence of injuries, they routinely offer between £1,000 and £2,000 to buy off claims and reduce the number of claimants that seek legal advice.  THIS is what encourages the perception of a compensation culture as everyone is aware that insurers may be willing to pay you damages even if you have suffered no injury.
  4. Insurers, unlike solicitors, are not bound by a professional code of conduct which imposes on them a duty to act in the claimant’s best interests. Their duty is to their shareholders and then their insured driver, not the injured third party.  They are ultimately held to account by the Financial Ombudsman Service and the Court but that requires significant time, effort and cost risk on the part of the injured party.
  5. Insurers have the financial clout to call your bluff. They can make an offer to settle your claim for thousands of pounds less than its actual value and stick to that offer. Your options will be to (a) accept the offer, or (b) take them to court; this takes time and carries some risk and, if you win, they will simply be required to pay you what their actual liability was anyway plus some limited legal costs (usually an extra £500).  If, for every unsuccessful court decision, they manage to pay thousands less out on 10 other claims, this is clearly a successful and profitable mode of operating and such low offers will continue to be made.

Some specific recent examples from my own experience:

  1. My clients regularly receive early offers from insurers attempting to buy-off claims before there is sufficient medical evidence available to allow the parties to assess the proper level of damages. Unfortunately, sometimes claimants accept these offers against my advice due to their financial needs. This is why such offers are made. However, I have had instances where early offers of between £1,500 and £25,000 have been made on cases which ultimately settled for hundreds of thousands of pounds. This highlights the huge risk posed to unrepresented claimants of under-settling their claim.
  2. On lower value cases, insurers repeatedly fail to offer compensation that accurately reflects the medical evidence.  Only last week, we had to take an insurer to court to recover proper compensation on a case that they would call a straightforward claim that does not warrant the involvement of a solicitor. The insurer initially offered £2,000, slowing rising to £2,400. We valued the claim at around £3,750 but the insurer refused to budge. The Judge ultimately awarded the Claimant £3,650.
  3. Insurers are still failing to respond promptly to claims. If liability is not initially admitted, we often find that full liability responses are not provided and, in that scenario, we often have to make an application to court for pre-action disclosure on the claimant’s behalf.  It is very likely that many unrepresented claimants would give up their claim at this point.
  4. Insurers can appear to be helping claimants when they are actually under-settling or otherwise prejudicing the claimant’s case by obstructing the involvement of an independent legal adviser.  I recently received instructions from a client injured nearly 3 years earlier. The at-fault driver’s insurer had taken months to admit liability but did then arrange a medical expert assessment and some physiotherapy treatment. My client did not recover in line with the expert’s prognosis and the treatment funding had expired. After my client had chased them up repeatedly, the insurer agreed to arrange another expert appointment and some further treatment. By this time, nearly 2 years had passed. My client was not sent that expert’s report until 2.5 years post accident, at which point the prognosis of that expert had already expired and she was still suffering from her injuries. At 1 month prior to the limitation date (by which time a client must start their court claim to avoid becoming statute-barred), my client received a letter from the insurer simply saying that they would no longer be able to deal with her claim based on the medical evidence. No advice was made about seeking legal advice or limitation. Upon receiving instructions, we had to immediately issue court proceedings to protect her position and ensure that she could recover damages for her injuries and losses.
  5. Insurers appear to once again be increasingly raising ‘low velocity impact’ defences, usually where the defendant was driving at less than 15mph immediately prior to impact, asserting that no injury could have been suffered by such a ‘low velocity’ impact. This then requires the claimant to jump through extra evidential hoops to prove their case on causation. This requires a detailed knowledge of the process, specifically in relation to the instruction of expert witnesses, without which many unrepresented claimants will be likely to drop their claim.

And despite the above and years of reforms that have favoured defendant insurers in the civil justice arena, the Government proposes making the fight even harder in 2018 by letting the insurers fight bareknuckle – they will no longer have any responsibility for paying the claimant’s legal costs for claims worth under £5,000 (about 80% of claims) and compensation for soft tissue injuries ‘only’ lasting 6 months will be limited to £400 (oh yeah plus £25 for any related psychological suffering so keep your chin up!).