Aviva's Rob Townend on removing 'easy money' from personal injury claims

It may take some time for the dust to truly settle following the surprise result of the General Election. A hung parliament poses questions on how we approach Brexit and what the future legislative agenda will be. These are significant issues that rightly demand the next government’s full attention.

It may be unsurprising, therefore, if the government took a bit of time before it turns to more ‘business as usual’ items. But I am concerned to see even at this early stage that some are sounding the death knell of the personal injury reforms, which represent a unique and important opportunity to address so much that is wrong with the current compensation culture and must be taken forward.

For me, these reforms begin, and end, with the consumer. Aviva has long argued that the consumer should emerge the biggest winner from the reforms: through lower premiums, reduced exposure to fraud and an end to harassment by claims management companies and their nuisance calls.

The urgency and need for reform was brought into sharp focus for me earlier this year when police prosecuted a crash-for-cash gang responsible for an induced accident that, tragically and cruelly, left two innocent elderly people dead. How can we continue to tolerate a system that provides incentives for and rewards this abhorrent behaviour?

The answer, of course, is that we can’t.

Understanding the problem

Before we can solve the problem, though, we must understand it: minor injuries resulting from road traffic accidents are rewarded with too much money, that is too easy to access.  This has created a cynical culture of compensation in which greedy opportunists, organised criminals, CMCs and some injury lawyers are lured by “easy money” that is ultimately funded by millions of honest motorists in their insurance premiums.

This is why it is absolutely critical that the reforms remove cash compensation for minor injuries. Leaving cash on the table will continue to incentivise crash for cash, putting innocent motorists in harm’s way and diverting emergency and public services away from real need.

That is not to say that insurers will walk away from their responsibility to look after the genuinely injured. But we should treat those who suffer genuine minor injuries with care, not cash. This will ensure the injured party is properly looked after, without attracting fraudsters and CMCs that seek to abuse the system. Insurers will also continue to pay for special damages such as loss of earnings.

But easy access to cash isn’t just fuelling crash for cash. It is also behind the 720 million injury-related nuisance texts and calls every year, has established a market for stolen road traffic accident data and is attracting a swarm of CMCs that circle the customer at every stage of the claim, trying to milk the system for all it’s worth.

We must be alive to an increasingly aggressive CMC industry. Tough, effective regulation that recognises the challenges associated with aggressive claims farming must be implemented as a priority. From where I sit, CMC regulation is taking too long, and questions remain on how rigorous it will be.

Regulation should include a cap on the amount of compensation that CMCs can take; currently, CMCs can take a shocking 40% of compensation awarded, which is not in the injured party’s best interests. CMC directors must also be held personally accountable for their conduct and any fines.

It’s more important than ever that consumers get the best deal from these reforms: premiums are at record levels, fuelled by the change to the discount rate; the insurance premium tax has doubled in 18 months; and Association of British Insurers data shows motor repair costs have increased by more than 30%.

Against this backdrop, the personal injury reforms represent a rare glimmer of hope for our customers. We must seize the opportunity and ensure that consumers – and society – are better off as a result. Only by implementing the right reforms, as originally intended, can we address the wider social malaise that is born from the UK’s compensation culture, while delivering the maximum benefit for our customers.