Personal injury claims down; Direct Line profits heading the other way

August 9, 2013

Motorists aren’t going to be happy. For years they’ve been told that the reason for their rising insurance premiums is due to the increase in personal injury claims stemming from road traffic accidents, notably whiplash, similarly rising.

In a week when the UK’s largest car insurer, Direct Line, put it’s 7.5% increase in profits down to the reduction in such claims over ‘recent years’, motorists are going to start asking questions. And some would say rightly so.

This news will give organisations like the Association of Personal Injury Lawyers (APIL) even more ammunition to fire when accusations of their industry supporting both the UK’s ‘compensation culture’ and the ‘ambulance chasers’ who make it up are launched in their direction.

How do these findings affect AXA’s credibility, now?

AXA’s report into whiplash, tabled to the Transport Select Committee as it was deciding what measures to take to curb the whiplash epidemic, seemingly lies in tatters.

At the time, many of the ‘facts’ used in the report were purported to be nonsense.

Direct Line’s 2013 half-yearly £157M profit will only add fuel to the claims that called out AXA over the statistics the group used in their argument to convince parliament that insurers had to intervene.

Calls for reduced time between traffic accidents and claims and the presentation of further medical evidence have, for the time being, been slung back in the insurers’ court as it’s they who’ve been told to get their acts in order.

Rather than the injury lawyers who are, after all, only doing their job to the best of their ability in accepting and winning genuine whiplash injury claims, the insurers taking such a public bashing now has a hollow ring to it.

Will insurers now pass on the savings to motorists?

More pressure will be heaped on the motor insurance industry over the coming weeks. Regardless of the backlash of the motoring public and the stern warning from the Transport Select Committee to get its act together, questions will be asked about exactly where the profit has already been paid.

According to one personal injury solicitors’ firm, £101M was paid out to Direct Line insurers in June, suggesting that the firm already had an indication of the Jan-Jun 2013 profitability figures. As two thirds of shares are own by RBS, being so au fait with the figures is no surprise, either.

With numbers of whiplash claims expected to fall, did Direct Line have an inkling that the Government would also be urging insurers to pass on the subsequent savings from fewer compensation claims to motorists?

Direct Line hedging their bets by growing a legal arm

Since the capping of fees that injury lawyers can charge on small claims was introduced following the Jackson reforms, insurance firms have been snapping up smaller legal entities who had made a living from the much larger fees claimable on personal injury cases before the ruling.

Direct Line seems to have gazumped even this early market. In order that it can pursue claims against its competitors, presumably for its own policy holders, the insurer is creating its own legal arm to fight for the victims of RTAs.

There’s nothing like having your cake and eating it, is there?

With Direct Line potentially earning from motorists’ insurance premiums and the fees it stands to win from taking their competitors to court, there really is no comparison in sight to the direct line of action they’re planning on taking.

Let’s hope that some of the profit at year-end finds its way back to the motorist who now not only faces being over-charged by insurers, but sued in court by them, too.