August 3, 2011

AXA recently announced some half decent results (see proper insurance publications for details), but, in making them public, AXA UK and Ireland Group chief executive Paula Evans wasn’t so much interested in talking about the company’s 100% COR and £2bn revenues as in leading the charge against referral fees and the broader industry malaise of which they are merely the most outwardly visible manifestation.

After a cursory look around to see whether anyone was questioning the idea that UK society is drifting into a compensation culture, Evans concluded that “There seems to be no question that UK society is drifting into a compensation culture.” What will happen when the inevitable collision occurs, Evans neglects to specify, but presumably it won’t be anything good.

But how have we arrived at a situation where every Tom, Dick and Harry seems to think they are entitled to redress whenever something bad happens to them? Evans blames “an an industry of claims management firms and personal injury lawyers that has formed to profit from road traffic accidents.”

It is this sinister cadre that has been running amok, actively encouraging people to seek compensation for every minor injury they suffer. In the UK, Evans, observes ruefully, personal injury claims are spiraling. Whereas in Ireland where the toxic interventions of claims management firms are as little felt as those of native snakes, personal injury claims are less than half as prevalent as in some parts of the UK.

Throwing figures together with gay abandon, Evans notes that a 10% fall in the number of road traffic accidents over the past three years has coincided with a 46% increase in PI claims on motor insurance policies, leading us ever closer to the nightmare meltdown scenario where nobody crashes and everyone claims.

Gratifying as it clearly is to reiterate that “Axa remains the only insurer to have banned referral fees,” heartening as the Government’s apparent mindedness to outlaw RFs may, likewise, be, Evans believes “more radical steps are needed.” First up: cut PI lawyers’ £1200 fixed fees for low-value PI claims down to size, Evans suggests, observing uncontestably that “logic suggests a reduced standard fixed fee in the region of £400 would still allow personal injury lawyers to earn reasonable profits.” Which, indeed it might, assuming zero client acquisition costs.

Sensing a whiff of invalidity about a significant section of the current bumper crop of claims, Evans suggests “There needs to be a comprehensive medical evaluation of muscle damage following a typical low impact road traffic accident” to “provide the basis for better diagnosis” so that “spurious claims can be filtered out and rejected without incurring unnecessary cost.”

Implement a programme like that, and we’d soon see premiums tumbling down.

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