Insurance Industry forced to explain huge TV ad spend

The House of Commons’ transport committee convened on 18 June to listen to cross-industry representatives from insurance companies, lawyers, as well as management companies, after the government delayed its whiplash reform proposals until MPs had sought more evidence.

The committee was told that insurers’ advertising costs were “absolutely astronomical’ and that money, which could be used to reduce premiums for millions of motorists, was instead being used to achieve market share for the insurance companies.

Matthew Stockwell, chairman of the Association of Personal Injury Lawyers (APIL), told MPs that reforms to the legal system that have already been introduced had effectively capped legal costs for accident victims by removing referral fees, and felt that similar action needed to be taken against the Insurance Industry.

The Law Society supported the banning of all referral fees and CMCs, by stating; “I suspect insurance companies are receiving referral fees from car insurers, from the sellers of parts to car repairers, from the sellers of paint to car repairers, and I think what we need is a very transparent understanding of… just where all these flows of money are coming from.” Recent figures published show that 79,483 claims were opened in April this year – around 17,000 more than in April 2012. The figures also show a surge in claims in the weeks prior to the Legal Aid, Sentencing and Punishment of Offenders Act coming into force, with 91,235 claims opened in March 2013 – a 25% increase on the previous month.

Asked by the committee whether the UK was “the whiplash capital of the world”, figures published earlier this year were supplied that showed total motor claims spending by UK insurance companies in 2011 was comparable with other major EU countries. Germany’s share was 20%, France’s 13% and the UK’s 14% – described as “normal market share”.