Businesses led by the Association of British Insurers are fighting back against a surge in “no win no fee” legal actions behind a 72 per cent jump in the number of bodily injury claims received by insurers since 2002.
Ford, Premier Inn, Asda and Argos are among the firms calling for action against claims management companies that send spam text messages to encourage people to “have a go” to claim a few hundred pounds from a company or insurer.
In a new report, the ABI slammed the “spurious and exaggerated” personal injury claims that cost business and government bodies such as the NHS billions every year.
“The current system encourages many people to believe that there is a compensation culture that they can exploit with exaggerated and fraudulent claims. The price for this is paid by millions of honest customers,” it said.
Legal fees for claims can be ten times the damages paid and all costs are borne by the defendant, leaving businesses bearing huge charges.
The ABI cited one supermarket chain that said its personal injury claims costs were equivalent to the annual turnover of five of its shops.
Motor insurance premiums have also risen sharply as claims from hard-to-diagnose injuries such as whiplash have soared. About £2.7m is paid out to claimant lawyers via premiums every day, the ABI said.
FAST FACTS | NO WIN NO FEE
● NHS legal fees have risen five per cent since 2004, but claimants’ costs are up 130 per cent
● Whiplash claims cost insurers £2bn a year
● Legal firms pay up to £1,000 per customer record to encourage people to make a claim