Monday, 24 September 2012

Business as usual

As motor insurers continue their efforts to put yet more hurdles in the way of innocent victims, we eagerly await more news from the Office of Fair Trading (“OFT”) which has been threatening to spoil the party.

Liability insurers constantly complain about the cost of dealing with claims by the victims of motor and other accidents.  As with clinical negligence claims[1] it’s all the fault of the claimants and their lawyers – nothing to do with their own fat cat salaries and meaty shareholder returns.

Strange in a way that the OFT should have come to the view at the start of this summer that “insurers compete in a dysfunctional way that may push up premiums (sic) for drivers by £225 million a year

The OFT’s market study provisionally found that an average of £560 is added to the cost of replacement vehicles by:-
  • Insurers of the not-at-fault drivers, brokers and repairers referring those drivers to credit hire organisations that charge inflated hire rates, in exchange for a referral fee of between £250 and £400 per hire.
  • Drivers being provided with replacement vehicles for longer periods than necessary, whilst they wait for repairs to be carried out by the garages nominated by insurers (also paying referral fees – see below).
The OFT’s report also provisionally found that the cost of repairs was inflated by an average of £155 each time by:-
  • Certain insurers receiving referral fees from repairers and associated trades; 
  • Certain insurers having agreements with approved repairers to charge higher labour rates when repairing a vehicle belonging to their insured.
So, insurance company A takes the backhanders from the car hire companies, garages and anybody else who’s willing to pay them and promotes the levy of hire charges and delays in repairs to help those that pay the referral fees get their money back and more.

That additional expense is passed on to insurer B (the policy holder will get nobbled for any shortfall) whose costs rise.
But it all evens out because in the next scenario the insurers will swap roles.

Ultimately the winners are those who can manufacture more in referral fees than they pay to fund all the artificial charges created by their cronies.

But they will all win because they can moan about these costs, blame them on lawyers (who, note, don’t figure in these scenarios at all) and take some more money off the punters.[2]

Repugnant?  Of course it is.

As the president of the Association of Personal Injury Lawyers, Karl Tonks, said “insurers have finally been caught with their hands in the cookie jar. What the OFT calls ‘dysfunctional’ and ‘inefficient’ actually reveals a host of grubby practices to line insurers own pockets”.

Business as usual then.

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