Motor insurance is a “highly dysfunctional” market where profit is pursued at the expense of consumers. That was the conclusion of a Report published today by a cross-party group of MPs, who also challenged the government on their unquestioning use of the insurance industry’s unsupported data on fraudulent claims to make key policy decisions.

Thompsons Solicitors, the UK’s largest personal injury law firm, has long campaigned for greater transparency in the relationship between the Government and the insurance industry. In January, the firm submitted a report to the Transport Select Committee as part of their inquiry into motor insurance, in which it was stated that while insurers claim to be victims of a ‘compensation culture’ built on fraud, they have in fact benefited from the ‘claims environment’ and made multi-million pound profits.

Today, the firm is welcoming the Transport Select Committee’s report for shedding new light on this hypocrisy.

Against public interest

In Driving Premiums Down: fraud and the cost of motor insurance, MPs on the House of Commons Transport Select Committee have exposed a market where the pursuit of profit by motor insurance firms has led to higher prices for consumers and to business practices which are clearly against the public interest.

The Report, published as part of the Committee’s inquiry, called on Government to ensure that the data on fraudulent or exaggerated personal injury claims that they use to support key policy decisions, are based on solid foundations. The Government has taken to using statistics from insurance industry body, the Association of British Insurers (ABI), as fact and recently parroted an ABI statistic claiming that there were 59,900 “dishonest claims” in 2012.

However, as Thompsons Solicitors pointed out, this statistic is highly questionable.

“Only 85 people have been prosecuted for fraudulent claims since 2011,” says Tom Jones, head of policy at Thompsons Solicitors.

“The insurance industry is seeking to create a sense of crisis where there is none and the power to deal with the issue is in their hands. It suits their ambitions to tell Government that radical restrictions on access to justice for injured people are needed in order to tackle fraud.

“We’re asking, if as they claim, 59,000 fraudulent acts took place – where were the convictions? And did they pay out – knowing that claims were fraudulent?”

Medical examinations vital

The Report drew particular attention to the practice of paying out compensation for whiplash claims they suspect to be fraudulent without requiring the claimant to undergo a medical examination.

“It is ridiculous to complain about whiplash fraud while at the same time limiting people’s chances of getting a proper medical report to support or refute their claims of injury.

“A thorough medical examination by an independent expert is a vital component of any personal injury claim. If the insurers are really concerned about fraud they would encourage medical examinations, not undermine them,” continued Tom Jones.

The Committee also called for the Government to consider the adverse consequences for claimants using the small claims procedure before making any further changes.

“A Government of millionaires may think that claims with a value of under £5000 are ‘small’ but that isn’t the reality for most people. They deserve proper legal representation in what are for them significant injuries or losses. The current limit of £1000 below which the claim is dealt with in the small claims court is appropriate and should be maintained.

“We wholeheartedly support the call for careful consideration in relation to findings of ‘fundamental dishonesty’. There is a real risk that minor errors cause a claimant to get no compensation at all, it is not what the courts think is right and it would be a travesty were it to be forced on them by the Government.

“Thompsons now call on the Committee to use this telling Report to stop the Government following blindly where the insurers seek to lead them.”