Lawyers accuse insurers of hypocrisy over discount rate

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Aug 01, 2017
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Insurers had claimed that cutting the discount rate used to determine compensation to claimants injured in car accidents would force them to put up premiums

Kim Kyung-Hoon/Reuters

Claimant lawyers lambasted insurance companies for hypocrisy after reports that British drivers are being fleeced in secret deals to inflate repair bills.

The Daily Telegraph accused insurers of routinely inflating repair costs by as much as 100 per cent and receiving kickbacks for the difference between the higher figure and the actual fee claimed by the garage. According to the newspaper, “the system is used by insurers representing drivers involved in accidents which were not their fault to rip off rival firms representing the at fault drivers for repair work”.

It is estimated that the scams could be creating a hidden cost of £750 million, which some suggest would be equivalent to about 5 per cent of the UK’s £34 million drivers’ annual insurance premiums.

Yasmin Ameer, serious injury specialist at Nockolds Solicitors, said: “The insurance industry is quick to blame the compensation culture and solicitors for the rise in insurance premiums. Now they need to take a closer look at their own processes and procedures.”

Earlier this year, the Ministry of Justice cut to the discount rate – the calculation used to determine lump sum compensation to claimants who have suffered life-changing injuries. The Association of British Insurers said the move would lead to an increase in motor and liability premiums. 

Ameer went on to say: “[Insurance companies’] hypocrisy is now laid bare for all to see. It is time for insurance companies to get their own house in order rather than blaming everyone else – be it the government, solicitors or their own customers.”

Bill Braithwaite, QC, of Exchange Chambers in Liverpool, agreed, saying: “The insurance industry has been telling drivers that the change in calculating personal injury compensation through a new discount rate will cost them millions of pounds in higher premiums. This does not sit well with the notion that they are inflating repair costs. Will the government now realise the truth behind the intense lobbying currently being carried out by insurers against the discount rate?”

The Ministry of Justice is reviewing the discount rate.

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