The UK has come to be known as the "whiplash capital of Europe," with government statistics claiming that such incidents cost the insurance industry around £2bn per year because for every accident reported, there are 2.7 claims for whiplash damages made.
It has long been suspected that fraud is a major factor in such claims and UK chancellor of the exchequer, George Osborne, took a hard, if somewhat bizarre, stand against it this week.
Osborne pledged measures removing the right to general damages for minor soft tissue injuries, such as whiplash, from a car accident. He also proposed to transfer claims of up to £5000 to the small claims court.
All told, the proposals are expected to reduce the cost of an individual insurance policy by £40-50 annually. “This will end the cycle in which responsible motorists pay higher premium to cover false claims by others,” removing more than £1bn “from the cost of providing motor insurance.”
The move has drawn fire from the legal community, as Steve Cornforth, senior partner at EAD, said in a guest blog on Legal Business, that the proposals would only hurt legitimate claimants, nor would premiums come down due to a previous tax hike on insurance premiums.
Yet the proposals could go some way to tackling fraud, which is at epidemic proportions. Earlier this year, UK insurer Aviva said that motor injury fraud in the UK accounts for 60% of all claims fraud it detects and fake whiplash claims in “crash for cash” scenarios are a key contributor.
Here at home, auto insurance fraud is also rife. Ontario is home to the most auto insurance fraud in Canada, and the province is notorious for it even outside of the country. It is a major contributor to Canada’s most populous area paying vastly higher premiums than those in other provinces. However, while single driver fraud is high, authorities are particularly concerned about fraud rings that are building up, especially in Toronto.
In a shocking criminal trial earlier this year, the Ontario Superior Court found a Peel police officer guilty of creating nine false motor vehicle accident reports for staged accidents. All told, insurers paid out almost $916,000 to the fraudsters and $272,000 in medical and legal expenses.
In September, the court sentenced the offending officer to five years in jail for his part in the scheme, but developments in the UK suggest authorities could get even tougher.