Who is responsible for the ‘compensation culture’ in the UK?

Who is responsible for the 'compensation culture' in the UK?Insurers say one thing, and personal injury solicitors say another – but who should you believe has caused the ‘compensation culture’ currently gripping the UK?

It’s no secret that car insurance rates have been rocketing upwards over the past few years. Insurers say that runaway personal injury claims are to blame – especially whiplash claims – but personal injury lawyers say that the insurance industry has brought this fate upon itself, but who should you believe when it comes down to the actual culprits behind the so-called ‘compensation culture’ supposedly clogging up our courts and draining the coffers of the nation’s insurers dry?

it’s the economy, stupid

It’s a simple truth that people tend to get more litigious in times of poor economic health, as money is more scarce for most people and that slights that would have gone largely unnoticed stand out as something to be pursued, even if it’s just for a few hundred pounds of personal injury compensation. In a poor economy, those few extra hundred pounds could spell the difference between being able to pay rent this month or not, leading people with relatively minor injuries to pursue an accident claim against an insurer when they would have simply shrugged it off and gone about their business in less lean times.

This isn’t to say that people bringing these claims are doing so out of a desire to commit insurance fraud, of course. The vast majority of injury claims brought against an insurer or an employer are valid, and you have a legal right to be compensated for any injuries you sustain through no fault of your own, regardless of the state of the economy; it’s just that more people need that extra leg up during times of financial unrest more than in times of relative bounty.

the double-edged sword

Insurance companies have been complaining that the sudden uptick in injury clams, especially those for whiplash injury, have been draining their coffers dry, which then forces them to raise rates for all of their customers in an attempt to recover their court costs and legal fees, not to mention the sometimes large compensation payouts made to injured parties. Insurers have pointed a finger at the legal profession for encouraging spurious claims and for charging exorbitant ‘success fees’ to losing defendants, which insurers claim make their costs even higher than needed, contributing to insurance rate hikes.

On the other side of the coin, legal experts say that insurers are not blameless by any stretch of the imagination. Evidence may exist that many insurers have been needlessly inflating vehicle repair and replacement car hire fees for their customers in an effort to raise rates, and the Office of Fair Trading has recently referred the entire insurance industry to the Competition Commission for a detailed investigation into the practice, which will be completed by 2014 and could lead to serious repercussions if the Competition discovers any untoward actions on the part of insurers.

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