Jack Straw attacks insurance ‘racket’

Mr Straw said this practice was a key reason for the spiralling cost of insurance, due to the increasing numbers of personal injury claims – describing it as a “racket” in The Times.

The Labour MP for Blackburn said the cost of personal injury claims had doubled to £14bn in 10 years. But in 2009 the number of accidents in which someone was hurt was 31 per cent lower than the average for 1994 to 1998.

He said: “This is not a system, it’s a racket. The quicker it’s ended, the better it will be for the law-abiding motorist.”

This is not a system, it’s a racket. The quicker it’s ended, the better it will be for the law-abiding motorist. Jack Straw MP

Mr Straw is angry at the practice of insurance companies passing on the details of their customers who have been involved in an accident to law firms. The law firms can then get in touch with the person who has had an accident and often encourage them to claim compensation on a “no win no fee” basis.

The rising volume of claims has lead to higher premiums overall.

Better regulation and no fees

Mr Straw wants better regulation of claims companies and their sales techniques. He also wants referral fees, which are paid by law firms to those who give them the names of people involved in crashes, to be banned.

He was alerted to the problem by constituent Phil Riley, who was “bombarded with texts and personal calls” following a minor “fender bender” in which he suffered no injury.

To find out how the claims companies obtained Mr Riley’s details, including his mobile number, Mr Straw confronted two major insurers. Both admitted selling customers’ details. Even police forces have sold this type of information with one unnamed force raking in £1.3m in this way over 2008-2009.

Many of these kinds of claims are for whiplash injuries, Mr Straw said, suggesting that motorists who suffer whiplash in an accident should be required to provide proof of serious injury.

The cost of treating whiplash to the NHS is £8m, but the cost of whiplash related claims to the insurance industry is £2bn, Mr Straw said.