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Claims specialists have defended their offerings after Jack Straw branded claims management companies (CMCs) and credit hire companies as “parasites in the system”.
Speaking to the Transport Select Committee on motor insurance Mr Straw also claimed CMCs existed to “generate claims artificially”.
Chris Shaw, commercial director at Ai Claims Solutions, defended his company’s practices while admitting other companies had issues to address.
“There are a small number of organisations in this sector which are causing significant damage for the majority. Specifically those organisations those who are data miners, the people at the unscrupulous end of the market place sending out text messages to people,” he said.
He continued: “It is not surprising and quite interesting that those organisations tend not to be regulated. They are not signatories to the General Terms of Agreement that we abide to. Unfortunately it is fact of life in any industry that you’ll always have rogue elements at the side.”
Mr Shaw argued the average cost of a credit hire invoice had fallen in the past five years and that the best elements of the sector were managing and controlling costs efficiently.
“We have not heard of any criticism from insurance companies in relation to credit hire referral fees. The focus has been on injury referral fees,” he said.
According to Mr Shaw, Ai Claims generated £400,000 from referral fees a year out of total turnover of £118m. He also queried whether a ban referral fees, which the company is opposed to, would reduce insurance premiums.
“The whole issue around referral fees and a potential ban on them feels like the government is feeling the need to do something to appease the general public but as opposed to using a scalpel it is using a sledgehammer,” he commented.
For Mr Shaw the smaller organisations at the periphery of the sector, dealing with garages, local NHS Trusts, ambulance drivers, policeman or recovery drivers presented the real challenge.
“If insurance companies were concerned or nervous about the quality of service that companies such as ourselves provided they wouldn’t refer customers to us in the first instance. The vast majority of the UK market, in terms of insurance companies, uses one of half a dozen accident management companies,” he claimed.
His argument that the best way to end the referral fee issue was to “nip solicitors’ costs in the bud” was taken up by Peter Ashdown-Barr, CEO of InterResolve.
“How can you police a referral fee ban?” he asked. “My view is if you bring down the amount that solicitors can recover from an insurer you limit the amount of money sloshing around. By doing that you achieve all the objectives of getting rid of the worst excesses.”
Mr Ashdown-Barr stated that the need for a marketing cost should be accepted as a concept but repeated that “the attempt to criminalise it [a referral fee] by defining it and legislating it goes out of the window if there is only a certain amount to pay.”
Like Mr Shaw, he pointed out there were different types of claims management companies and while reluctant to be drawn on Mr Straw’s comments directly, he accepted excessive behaviour needed to be addressed.
“There are responsible CMCs,” he said. “It would not be right to condemn them all but the ones who do all the texting and excessive cold calling, that has to be kicked out of the market.”
Dickon Tysoe, director at professional claims handlers Bankstone, pointed out that his company did not send text messages to drum up business and that personal injury claims represented a single figure percentage of all claims it handled.
“When we do get a claim there is a definite skill in getting the right lawyer who will handle the claims to the client’s best advantage,” he claimed.
Mr Tysoe cited an example of a motorbike rider who had a claim after riding across a damaged road. He argued that having a panel of lawyers who could acquire the business at a reasonable cost and deliver to strict service level agreements added value to the process.
“All of our lawyers work to a really strict service level, they have to be able to accept all the data electronically, be available when the customer calls and keep them informed,” he said.
“All of our work comes to us because insurance brokers choose to use us,” he concluded.
Original Article: Insurance Age
Medico Legal News Source: Claims Standards Council
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