The private car insurance market in the UK has been described as 'dysfunctional'
A group of MPs has called on the UK's car insurance industry to “put its house in order” after accusing it of encouraging fraud and exaggerating accident claims.
A report submitted by MPs on the government's Transport Select Committee focused on how the car insurance industry handles claims, particularly those related to whiplash. Insurance companies are accepting whiplash claims without proper medical documentation, says the report, and in doing so raising insurance premiums for the public.
The Association of British Insurers says it accepts that insurers are taking part in a 'dysfunctional' system, but Motor Policy Advisor Rob Cummings says the ABI is pushing for change: "We've argued for a number of years that this is a significant problem for the industry, and it's a problem that costs the public £2 billion per year.
"We strongly support a reform in the way medical evidence is presented. At the moment insurers don't feel that the medical reports are worth the paper they're written on, and that there's no objective test for whiplash.
“That means that when someone is in a car accident and they go along to the doctor for a medical report, they're self-diagnosing their injuries to the doctor, who can do little more than take those injuries at face value."
With 477,000 whiplash claims in 2012 the ABI has called the UK the 'whiplash capital of Europe'.
Cummings believes this is down to a blame culture: "There's very little an insurer can do to disprove a whiplash claim. The biggest problem is our compensation culture: the lack of a whiplash test is the same for all European countries, but the UK with its 'no win, no fee' culture means that people can put forward a speculative claim knowing that if they do lose they won't have to pay anything.
"That means that if you're in a car accident you'd be a bit foolish not to make a claim because you've got nothing to lose."
The entire private car insurance industry is already under investigation by the Competition Commission, who stepped in last year after the Office of Fair Trading described the UK's private car insurance market as "dysfunctional”.
Speaking about the decision, chief executive of the OFT John Fingleton said: "Competition in this market does not appear to work well for drivers. We believe the focus that insurers have on gaining the competitive edge through raiding their rivals' costs means that drivers pay more than they need to for their motor insurance policies."
The Transport Select Committee has argued that there needs to be a stricter protocol in place for handling whiplash claims, with one MP suggesting that claimants should provide proof that they have been seen by a doctor or have been to an accident and emergency department.