Above the law

Channel 4’s Dispatches report on Monday evening may have opened a few more eyes to the grubby antics of the insurance industry. There is a danger also that many have come to the conclusion it’s just how they operate and as long as there is still an affordable premium available, that’s all that matters.

The problem is far deeper than that.

Harry Wallop’s report highlighted in particular two practices which many people might reasonably call “scams”.

Many of us have had the experience of getting the car repaired after a collision.  Often, particularly in crisis period, we prefer to give the business to somebody we know and trust, who might well be the appointed dealer for our car’s manufacturer.

That’s fine because (probably) when we were sold the policy it was on the basis amongst other things that we could choose our repairer etc.  In reality it doesn’t happen because insurance companies insist that the vehicle goes to one of their “approved” specialists.

Is this because, like panel lawyers (see Panel beater) they are better than everybody else?  No, it is because they do what they are told by their paymasters.

As the Dispatches programme revealed with first-hand evidence from people in the industry, that may go as far as compromising on safety features and using non-manufacturer approved parts to save money.

Beyond that, insurers are making money by insisting that their pet panel beaters purchase parts, including paint, from specified suppliers and nobody else.

The reason is that insurers then receive from the paint suppliers what is benignly described as a “rebate”.

Take a look at the definitions within the Bribery Act 2010.  The key provisions are summarised in my blog Bribery - every step of the way..  How can anybody say that the system of rebates is not plain and simply a practice of paying and receiving bribes?

The other charming practice that was covered, again with the assistance of direct evidence from people in the industry, was that of inflating repair charges within “no fault claims”.

It’s simple enough.  In most accident claims, one or other driver will be responsible.  One is “at fault” and the other isn’t. The insurers of the “at fault” driver are going to be paying for the repairs, but the repairs are organised by the innocent driver’s insurance company.  That insurer pays the repair bill and then, you would expect, claims back the cost from the “at fault” insurer.

No, they claim back the cost and more.  In other words, they add a margin to their actual outlay and make a profit. It’s estimated to manufacture £225 million a year (adding to the cost of your premium).

One such disputed claim was dismissed and harshly criticised by a county court judge in 2011.  It grabbed the attention of the Office of Fair Trading, leading to the observation that the industry was “dysfunctional” and a reference to the Competition Commission, which is ongoing (see Business as usual).

The insurers who were on the wrong end of that decision in 2011 appealed to a High Court judge and succeeded.  It is thought that there is going to be a further appeal, but it is also said that since then more insurers are looking to formalise these arrangements which the High Court appears to have sanctioned.

The decision seems bizarre to many people including lawyers I know.  It looks to most of the world like an inflated claim.

Ironic that insurers are apparently feeding off each other with these inflated claims whilst at the same time now routinely and vigorously pursuing jail terms for accident victims who are said to have exaggerated their claims against insurance companies.

One rule for one and one rule for another?

These organizations already operate above the law.  With the present assault on the civil justice system they are now aiming - and seemingly succeeding with the assistance of our impoverished and supine government – to raise themselves up above the clouds.