The Association of British Insurers (ABI) has announced a new voluntary code of conduct for insurance companies who pursue compensation for victims of road traffic accidents through third parties.

At first glance it appears that the ABI may finally be listening to criticism at the widespread practice of supplying information about victims – often without their expressed consent - to third party claims management companies, who then may harass the injured party to sell them legal services.

This unethical practice means that injury victims lose out on independent legal advice and find themselves whisked through the claims process without understanding fully what is going on and invariably ending up with less than full compensation.

Tom Jones from Thompsons Solicitors comments:

“The insurers are implying that they have been hard done by even though LASPO has bolstered their power in the legal market place by introducing much greater use of fixed costs and forcing injured people to pay part of their legal fees from their compensation.

“Insurers often seek to settle quickly and cheaply and will cut down on upfront expenses by simply avoiding them. Expert medical reports to support a claim may cost upwards of £1,000 and insurers have been criticised by the Justice Secretary, Chris Grayling, for making settlement offers without getting any medical report at all.

“It is these ‘stack them high, sell them cheap’ business practices that the ABI clearly feels it needs to be seen to be addressing, or else it risks the government doing it for them.

“However, as is usually the case with the insurance industry, it tends to be the bottom line that is the main motivation for change. The ABI states that this code will help insurers to work for ‘genuinely injured claimants’ and navigate the legal environment more effectively to reduce the number of ‘inflated’ or ‘unmeritorious’ personal injury claims, often, they claim, involving whiplash.

“Thompsons Solicitors and other specialist personal injury firms know the reality. The problems the insurers seek to exaggerate with fraudulent claims and whiplash are used to justify high premiums and big profits.”

The ABI’s new code asks insurers to:

  • Take steps to ensure that policyholders are made aware of their options when choosing a lawyer;
  • Highlight the customer’s right to choose their own legal representative, not the one that the insurers – or their claims management companies – give them;
  • Not apply, or use firms who may apply, hard-sell tactics on potential customers;
  • Not share policyholders’ personal information to third parties if they have already said they don’t want to pursue a claim.

This is a voluntary code and we are told that 17 firms have signed up so far.

There are no sanctions to enforce the code and nothing to stop insurers opting out when convenient.