Mugged - by Your Insurer; Wondered Why Your Premium Has Rocketed? Astonishingly, It's Not Just Fraud and Greedy Lawyers. No, Your Insurer Is the REAL Culprit

Daily Mail (London), June 8, 2011 | Go to article overview

Mugged - by Your Insurer; Wondered Why Your Premium Has Rocketed? Astonishingly, It's Not Just Fraud and Greedy Lawyers. No, Your Insurer Is the REAL Culprit


Byline: JAMES SALMON

GREEDY insurers are creaming an estimated [pounds sterling]4.7 billion a year in 'backhanders' from no-win, no-fee lawyers and claims handlers, which target motorists involved in accidents. With the average car insurance policy set to break the [pounds sterling]1,000 barrier within the next year, JAMES SALMON -investigates the real reasons your premiums are rising ...

WHAT'S-THE- PROBLEM?

MOTORISTS have rarely had it so tough.As well as soaring prices at the pumps, they were hit with a record 33 pc hike in premiums last year.

Overall, drivers are paying at least a fifth more to run their cars than they were a year ago, with the average cost hitting [pounds sterling]3,090.

Fuel costs -- based on driving 10,000 miles a year in a Ford Focus -- also went up from [pounds sterling]1,400 to [pounds sterling]1,721 a year, according to research from Sainsbury's Finance

The average annual comprehensive insurance policy now costs [pounds sterling]892, according to the AA, and is expected to rise by a fifth this year.

As Money Mail revealed last month, motorists in some postcodes are being blacklisted or seeing their premiums double because of high levels of fraud. Areas affected include parts of Birmingham, East London, Manchester and Bradford.

However, fraud is not the only reason for rising premiums, nor is it that we are having more accidents. In fact there are fewer, with 222,146 people were killed or injured on Britain's roads in 2009, compared with 341,592 in 1989.

The key reason is the cost of each claim is soaring. Insurance companies blame a combination of fraudulent claims, uninsured drivers and 'no-win no-fee' personal injury lawyers for pushing up costs for honest motorists. But they, too, take their cut.

The figures are breathtaking:

FOR every [pounds sterling]100 paid in premiums, [pounds sterling]10 goes to personal injury claim lawyers, according to the Association of British Insurers.

UNINSURED drivers also add [pounds sterling]30 a year to the average policy; fraudulent claims another [pounds sterling]40; legal fees in settling personal injury claims, [pounds sterling]41; and credit hire firms which loan replacement vehicles, [pounds sterling]44.

ALMOST half of motor insurance claims go to cover the cost of whiplash claims, fraud, legal fees and tax.

THE cost of personal injury claims has doubled from [pounds sterling]7 billion to [pounds sterling]14 billion over the past ten years.

But although the insurance industry is all too keen to reel out these statistics, it is less reluctant to point out that the industry itself is often at the root of the problem.

THE-GRAVY-TRAIN

WHEN you are the victim of an accident you also become a valuable commodity. Your details are bought and sold by a variety of firms all looking to make money out of you.

MPs have described the insurance industry's referral system as a 'merry go round', with the motorist footing the bill. These include insurers, personal injury lawyers, credit hire companies which arrange replacement cars, garages, claims handlers -- even the police.

The reason you are so valuable is you may be able claim compensation for an injury, or hire a replacement car while yours is being repaired. Their bill will then be paid by the guilty party's insurance company. When a customer has an accident for which they are not to blame, their insurance company can sell their details to these firms. The typical referral fee is [pounds sterling]750, according to estimates in the Jackson Report, an independent investigation into the UK's compensation culture commissioned by the Government.

Money Mail analysis -- based on industry figures and research from a personal injury lawyer-turnedwhistleblower -- suggest insurers pocketed [pounds sterling]4.74 billion last year alone from selling their customers' details. …

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