Finding Fault – Insurance Premium Rises and Modern Day Myths


Allegedly we are gradually falling into that most awful of social pits – a compensation culture.  With the justice minister Jonathon Djanogly announcing recently that the referral fees paid to insurance companies by solicitors will be banned.  Djanogly has stated that this compensation culture is responsible for driving up the costs of insurance premiums (last year it was the bad weather) and believes that it is time something should be done.  Having checked their income streams from the referral fees the insurance companies have decided, on balance, it might be worth agreeing.  To be fair, Djanogly has no reason to like the concept of compensation – along with many other MPs he agreed to repay some of his expenses claims in 2009, £25000 in his case.  Ouch; damn those, erm, “moat-cleaning-costs-chasing” civil servants.

Losing profits

In the ministerial sights are, of course, those terrible solicitors and law firms who actually try to encourage victims of accidents to seek compensation.  The argument runs that the cash strapped insurance companies have to push up everyone’s premiums to cover the cost of paying out on claims for personal injuries (and snow, and young drivers, and, well you get the picture).  The fact that one company admitted to £9 million in pre-tax profits made from referral fees to solicitors is largely ignored.  However, what the furore over referral fees and insurance premiums seems to largely ignore is the judicial system.  That would be those people in the funny wigs who ultimately decide where blame lies and who gets what in the compensation culture.

Judging matters

It’s true – some of the cases that make the headlines make you think the world has gone just a little (or a lot) mad.   However, headlines are one thing and court judgements are quite another.  One boy recently attempted to claim that a broken arm sustained while jumping off a swing was due to the negligence of a local council for not stopping him.  I’m not a great fan of local councils, but let’s face it you can’t be everywhere at once; nor can you stop every child in the district jumping off stuff that has an element of risk relating to its speed and height.  Thankfully, for common sense at least, the judge found in favour of the council.

While it’s easy to blame insurers and solicitors for this type of claim they usually do mention the phrase “have you had an accident that wasn’t your fault” in their advertising.  It’s not even in the small print and perhaps for the boy and his family the phrase “your fault” should have rung some alarm bells.   I jumped off more than one speeding object in my childhood and resulting grazes did not have me running for the law; quite the opposite on most occasions.  The very simple point being that ultimately these cases are subject to judicial decisions.  They’re not decided by solicitors, ambulance chasing or not, nor by insurance companies.  Despite what some people might think, judges often exhibit an incredible amount of common sense.

One other, far more tragic case, illustrates this point equally well.  In June 2007 a young boy was killed in Norfolk when a tree fell at a National Trust property.  The subsequent case claiming compensation for the victim and several others injured in the incident eventually found in favour of the National Trust – on the basis that there is “no such thing as a completely safe tree”.  The ruling perhaps underlines that sometimes a tragic accident is just an accident.

A new insurance model?

The banning of referral fees will probably have little effect on the number of claims made through the courts – figures suggest this number hasn’t risen while the ‘no win no fee’ system has been in place.  Judges will ultimately continue to make judgements based on ‘fault’ or lack of it.  Accidents will continue to happen and insurance premiums will continue to rise.  To make up for the loss of referral fees perhaps the insurance companies could introduce a new policy to insure against the cost of insurance premiums rising. Don’t hold your breath though, as claims on this type of policy would almost certainly hit their profits.

Despite rumours to the contrary we probably don’t live in a compensation culture. Ultimately the judicial system is responsible for determining where fault lies if at all. A personal injury solicitor Edinburgh can offer advice if you have had an accident that was not your fault.