A cross-party committee approves plans to limit compensation and ban solicitors from offering inducements such as cash and iPads to motor accident victims.
An influential panel of MPs have backed the government’s plans to clamp down on whiplash cheats.
The cost of fraudulent and inflated personal injury claims is thought to be around £2 billion a year, adding around £90 to the cost of a typical annual car insurance policy.
Stamping out inducements
MPs on the Transport Select Committee have this week given the thumbs up to proposals by the Ministry of Justice which would stop lawyers and claims companies giving accident victims inducements to seek compensation.
Committee chairman, Louise Ellman MP, said: "Solicitors must be banned from generating more work by offering inducements, such as cash or tablet computers, to encourage people to make a claim."
Ellman added that the committee wanted to see minsters ban insurers from settling whiplash claims before an independent medical examination had been carried out.
And the panel also backed plans for a total block on compensation claims where the victim was found to have been "fundamentally dishonest".
'Complex legal implications'
This would result in those who had exaggerated the extent of their injuries receiving no compensation whatsoever.
But the committee warned that the government should draft such legislation very carefully due to the “complex legal implications” involved.
Ellman said: "This is our fourth report on the cost of motor insurance and while premiums are now falling, aspects of the market remain dysfunctional and have encouraged criminality to take root.
"Further action is still required to tackle fraud while protecting genuine claimants."
The latest Confused.com Car Insurance Price Index, produced in association with Towers Watson, showed that cost of the average comprehensive policy was down almost 20% to £596 in the first three months of 2014 compared with a year earlier.
Could plans backfire?
Industry body the Association of British Insurers (ABI) welcomed the plans to ban inducements, but warned that the requirement to carry out medical examinations in all cases could in fact increase insurance prices.
James Dalton, the organisation’s head of motor insurance, said: "A medical report for a minor injury claim produced years after a car accident adds no value whatsoever.
"Removing an insurer’s ability to settle a claim without a medical report will only serve to increase insurers’ claims costs, and consequently premiums.”
Martin Milliner at LV= Car Insurance said: "The principle of stopping the practice of insurers settling personal injury claims before the claimant has undergone medical evaluation is admirable but it is completely out of touch with what behaviours are operating in the personal injury marketplace today."
He added that despite the number of car accidents falling in the past five years, claims for whiplash-type personal injuries had increased significantly.
"This growth has been fuelled by a relentless claims management industry that has cold-called crash victims persistently, offering them iPads and cash payments upfront to encourage them to make a claim," Milliner said.
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