Friday 11 March 2011

Merry-go-rounds, crash for cash and insurance

What was behind the 25% increase in my car insurance quote this year? Or the 33% rise in the average premium, leaving it at a record level, or the 58% jump in young drivers' insurance costs?

The Transport Select Committee has laid bare two features of the insurance world which will leave some people shaking their heads.

The first is the merry-go-round of "referral fees". If you have an accident, likely as not, either your insurer or the breakdown company or the repair company or even the car hire company will sell your details to a personal injury law firm, for a fee.

And the lawyers or claims companies will pester you to sue for compensation.

MPs say that the referral fees can range from £200 up to £1,000. There are more claims and the fees get added to the bill.

The second feature is the proliferation of "crash for cash" scams. The police told MPs that there were 30,000 staged accidents in a recent 12 month period.

The fake crashes are used to justify fraudulent insurance claims, many of them for injuries which never occurred.

The Select Committee speculates that these criminal claims are growing in number, for the obvious reason that the scam works.

But the result of both of these developments is that there is even more pressure on the price of insurance.

And today's report suggests that insurers don't care as much as they should, because they have a pressure release valve. If their costs rise, they simply pass them on to the motorist.

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