Politics of compensation
Newspaper headlines tell you of large compensation awards, fraudulent claims, or the rising cost of road accident claims to insurers. What you do not read is how organisations are reimbursed as a result of a compensation case being brought.
After a road accident the Government can recover up to £505 for accident and emergency treatment, and £620 per day for inpatient treatment. The maximum recoverable is £37,100. An additional payment for ambulance call out is £159. The money is only paid if the person treated by the NHS makes a successful claim. The payment is made by the insurance company of the party responsible for the accident or injury.
When state benefits are paid after an accident or injury they are repaid to the Government by the insurance company of the person or party responsible for the injury. This can be a little complicated as not all benefits are repayable. The system is called “recoupment” as the benefits are recouped when a compensation case is successful. You claim your financial losses, the benefits you have received are deducted from those losses, and the insurance company pays the benefits back to the Government. You should view the benefits you receive as payments on account of compensation. The advantage of benefits is you receive them because you are injured, and you receive them immediately. You only get compensation if you can prove someone is at fault, and the payment is usually received when the case ends.
Some employer contracts mean sick pay received after an accident for which you recover compensation, is repayable to the employer. Be careful your solicitor checks with the employer to avoid an unnecessary squabble with your employer. Do not worry about these clauses as they are quite common. The sum due to the employer is added to the calculation of the claim. The insurance company for the person or party responsible pays, so you still recover your actual losses.
Medical insurers, like our friends at BUPA, have a clause which means you are liable to repay their outlay for treatment after an accident for which you recover compensation. If your case is successful you must repay your insurer. Just like the employer situation you include the expenditure in your claim, and is is repaid to the medical insurer. The repayment is effectively made by the insurance company of the person or party responsible for your injury.
Insurance companies regularly recover their expense. If your car has to be repaired after an accident which is someone else’s fault, you might turn to your own fully comprehensive insurance company to cover the cost. If you have an injury or other losses you can claim against the person at fault, and when you succeed your own insurer is repaid for their outlay. This is a positive for you, as once repaid, your own insurer will not penalise you for claiming on your policy. Insurance companies make claims too.
Insurance companies used to operate a “knock for knock” arrangement for motor policies. An insurer would say to itself that its drivers were going to be involved in accidents, some would be their driver’s fault, and some would not. Rather than squabbling with other insurance companies why not cover our own losses. It was a sensible arrangement between the insurance companies, as it kept their costs down. Whether it suited the motorist is another question, as your insurer might treat you as having made a claim on your policy even when the accident was not your fault. In recent times the “knock for knock” agreements have fallen away, as new insurers have entered the market and not wanted to play by the old rules. It can mean that if you claim on your own policy when someone else is at fault you will be penalised when you renew, as your insurer has paid out on your policy. If you want to avoid this you have to seek compensation, and it is not the responsibility of the insurer to recover their expense.
Insurance companies receive income by referring compensation cases to solicitors. It is perfectly legitimate to pay and receive referral fees so long as those involved satisfy the Referral Fee and Claims Management regulations. This means you should be told that a referral fee is being charged, or paid, and how much. It does feel odd that insurance companies complain on the one hand about the number of compensation claims being made, and on the other identify people who can make claims and refer them to solicitors in return for payment. Short term business is about income, so who can blame the insurers. Estimating conservatively the average referral fee for a road traffic accident case is £700.
Trade Unions are in favour of compensation claims. They provide a service to their membership, and if the cases are managed properly they can make money. In the explanation of conditional fee agreements and after the event insurance it is explained how the cost of that insurance is paid for in addition to your solicitors costs. Trade Unions are doing the same job as an after the event insurer, as the Trade Union would pick up your legal bill if the case failed. In return for that risk a Trade Union can recover a premium equivalent in successful cases. The system is designed to allow the union to build a fighting fund to pay for the costs in failed cases. If they do not lose money the system means income for the trade union. Not all unions operate this system, and if they do the premium equivalent will vary, but £500 per case looks like a conservative estimate.
Claims management companies exist to attract those who may have compensation claims. You have seen their advertising and catchy slogans. They have very effectively put themselves between the solicitor and their client. Many solicitors have given up on any form of marketing, and just buy cases from the claims management companies. Claims management is a perfectly legitimate business, only recently regulated. Regulation is designed to stop cold calling and silly promises. The referral fees charged to solicitors plus other income from insurance and expert evidence agency arrangements conservatively amount to £1,000 per case. You should not pay for any of this expense. It is the solicitors expense, and you should not see any deduction from your compensation. If your arrangement means you pay anything you should say no. The referral fee is the solicitors marketing expense, not yours.
Credit hire companies provide vehicles, and undertake repairs, after an accident for which someone is to blame. They fall under the claims management company umbrella. If they refer personal injury cases they fall under the same regulation. It is an interesting business, based on you being blameless, and someone else being responsible. Lets say your car or motorcycle is off the road for repairs and you need a replacement car or motorcycle for a fortnight. Your own insurer may not be keen to give a courtesy car, and the body shop has none available. Do you take taxis or hire a car, or do you use credit hire? If you take a credit hire you sign an agreement accepting liability for the cost of hire. If the hirer is confident someone else is to blame, and insurance is in place, they will provide a vehicle. The idea is to recover the hire from the insurer of the person to blame, and you pay nothing. Credit repair may also be available on a similar basis. Credit hire companies do get criticised for their hire rates, but to be fair they do exist because insurers will not pay for alternative transport when your car or motorcycle is in for repair.
Alternative transport may be offered by your own insurance company. However, if you have bought your insurance policy on price do not expect first class service. If an insurance company offers a courtesy car the expense is usually covered by the body shop doing your repairs, or by a credit hire company. The insurance companies have found ways of providing a service without bearing the cost. That is to their credit as it allows them to be competitive on premiums. There are good and bad credit hire companies. For them to be paid you must be liable to pay the hire. You must beware of ending up with the bill in your hand. Take advice from an experienced solicitor who knows the work of the credit hire company.
