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British Insurers Told to Drop ‘Sharp Practices’ on Car Claims

Britain’s insurers should abandon “sharp practices” driving up the cost of auto premiums and the government ought to make it harder for whiplash claims to succeed, according to a House of Commons committee.

Soaring costs of uncontested whiplash claims have caused motor insurance premiums to spiral and need to be curbed, the cross-party Transport Committee said in a report published today. The report also criticized insurers for “sharp practices” including selling customer data to lawyers to push up claims costs for rival insurance companies.

“The threshold for receiving compensation in whiplash cases should be raised and, if the number of such claims does not fall significantly, the Government should bring forward primary legislation to require objective evidence” before a claim is paid, Louise Ellman, chairman of the committee, said in a statement.

British car insurance premiums rose to record levels in 2011 after years of surging personal injury claims caught up with insurers, forcing them to raise prices. Car insurers, claims management firms and brokers have been blamed by members of Parliament including former Justice Secretary Jack Straw, for selling information about customers to no-win no-fee lawyers and car-rental firms, who then pursue claims from rival insurance companies.

The amount paid in claims by insurance companies rose 28 percent to 10.3 billion pounds in 2010, according to data compiled by the Association of British Insurers. The number of accidents on British roads fell 18 percent to about 154,000 in the four years to 2010, according to the Department for Transport.

‘Personal Data’

“Drivers should not be railroaded by cold callers into launching legal action,” Ellman said. “The insurance industry must abandon sharp practices that push up premiums such as passing drivers’ personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms.”

Justice Minister Jonathan Djanogly said in September he will ban insurers receiving referral fees from lawyers as part of an overhaul of the legal system. The committee today warned the move would be ineffective if solely targeted at lawyers and that the fees should be banned outright.

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