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Richard Schooling's blog: 4 July 2011 - Insurance risks
Date: 04 July 2011
If you've ever wondered whether paying for specialist insurance claims management was worth it, this week's revelations about bogus injury claims should provide the answer.
But before we get into that story, let's quickly run through the whiplash scam.
One of your drivers has a minor bump with another car. No-one is hurt. They exchange details and go their separate ways. But a little later, the other driver puts in a claim for several thousand pounds from your company or its insurance policy for a whiplash injury.
When you ask your driver about it, they look sheepish. They admit they've also been contacted by firms offering to get them a four-figure insurance pay-out. All they have to do is to suddenly 'remember' that they hurt themselves as well.
You sink back in your chair, weighed down with a world-weary scepticism at yet more evidence that everyone is, indeed, at it these days.
The perpetrators of insurance fraud pretend that it is a victimless crime. In reality, it costs its victims billions of pounds every year. Everyone's motor insurance premiums increase as a result. Motor premiums leaped by 30%, last year, even though road accident injuries fell by 31% over the preceding decade.
To make matters worse, it's quite clear that a few insurance companies are working with the ambulance chasers instead of trying to fight them.
For a fleet, it's rather like riding into Dodge City and finding that the sheriff has rented out his office to the Chisholm Gang. That's why you need a hired gun of your own to look out for your interests. That is where claims management comes in.
There's a lot more to claims management than chasing bodyshops to turn repairs around more quickly. Blocking bogus claims is a skilled job, often involving the use of high resolution aerial photography, computer simulations and sending out trained investigators to knock on doors.
That may all sound somewhat excessive but the payoff for the fleet can be a 40% to 50% reduction in third party claims costs.
On Monday, the former Foreign Secretary, Jack Straw MP, made it clear why firms need to be tough on third party claims. He made representatives from the insurance industry admit that some insurers are selling information on their policyholders to 'ambulance chasing' firms for between £200 and £1,000 per name.
These firms use their powers of persuasion to get people to make injury claims. A friend of Straw was deluged with calls and texts urging him to put in an injury claim over a minor accident, although he wasn't hurt.
For example, real whiplash injuries apparently cost the NHS £8 million a year but £2 billion - 250 times the medical cost - is paid out in settlements. As Straw says, it's the economics of the madhouse; paid-for by honest businesses and drivers.
Mr Straw has taken the matter to the Information Commissioner, hoping he can deter the companies in question from selling their customers' details. And in the long run, when the current muddle over insurance regulation and consumer protection is sorted out, the unscrupulous firms who buy the data should find it less easy to make money from exaggerated claims.
In the meantime, it's still Dodge City out there. Unless you're absolutely sure that your insurer or broker is one of the good guys (and there are still plenty of them), it makes sense to have professional accident and claims management on your side when bogus claims start flying around.
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