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The Institute and Faculty of Actuaries has welcomed the government decision to ban referral fees after its research found claims management companies (CMCs) pocketed almost £0.5m last year.
The study also found the percentage of bodily injury claims in the North west of England is the largest in the UK and America.
The research revealed CMC’s made a national turnover of £337m- a 50% increase from last year.
It found a “strong positive correlation” is said to exist between the number of claims management companies in a region and the number of third party injury claims.
Third party working group chair at The Actuarial profession, David Brown said: “Claims management companies in England and Wales make money from referral fees; they sell on the details of the case to a solicitor, for example, and receive a fee for this. At present there is no regulation of referral fees although the Ministry of Justice is currently seeking to ban them.”
“It is, of course, right and proper that those who have suffered bodily injury are able to claim compensation, but with claims management companies’ turnover rising by 50% to £337m in 2010, this is clearly a big money industry.”
“We welcome the announcement from the Ministry of Justice proposing to ban referral fees and we will work with them, and others in order to try and restore sense to the claims system.”
The research also shows the North west of England has the largest percentage of bodily injury claims arising from car insurance at 43% – outstripping the Nevada which at 40% has the highest number of third party claims in North America.
Unlike small bodily injury claims that are rising while the number of road traffic accidents is falling, the number of large bodily injury claims moves in line with RTAs. The exception is 2010 where even though there were 6% fewer accidents in 2010 than in 2009, the number of serious bodily injury claims went down significantly more.
Brown said: “This could be due to the poor weather late in 2010, which meant serious bodily injury claims were not reported; or people were travelling less because of the poor weather.”
Other revelations from the study included large bodily injury claims cost rising- in 2009, the average cost was £500 000 compared to 2002 when the average cost was £0.5m.
And year on year, for a 5% increase in the number of bodily injury claimants, accidents involving bodily injury have been increasing year on year by 10%.
Original Article: Post
Medico Legal News Source: Claims Standards Council
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