[Phil Wilson in the Chair]
I beg to move,
That this House has considered personal injury fraud.
Mr Wilson, thank you for presiding over this debate, which I feel fortunate to have secured. It is and will always be a pleasure to serve under your chairmanship.
I declare an interest as both a justice of the peace and one of the 30 million-plus drivers in our country. I am also a freeman of the City of London, and since securing this debate I have been contacted by various claims management companies, solicitors and insurers, big and small, who have offered information and briefings to assist my contribution. I explicitly thank the Industry and Parliament Trust and Liverpool Victoria, or LV=; I spent Monday with various of their personnel who deal daily with fraudulent personal injury claims, claimants and the companies that are farming information—or vishing, as I learned—to generate moneys for themselves. Ultimately, anyone with an insurance policy is paying for this immoral action through rising insurance premium costs.
I entirely concur with my hon. Friend. Indeed, I will cover that issue later in my speech.
Before I had the luck, honour and privilege to become a Member of Parliament in 2010, I was the victim of a car insurance scam, having previously suffered twice after uninsured drivers caused accidents involving my family’s vehicles. In 2009, at a roundabout near Cheshire Oaks, a car purposely stopped in front of me for no reason. The ensuing collision slightly damaged my bumper—well, in fact it was the front bumper of my father’s three-week-old 700 series BMW. Despite the low speed and very minimal damage to just his bumper, a claim was made with my insurers for some £16,500.
The court threw out the claim—after a protracted, three-year-long case—as, among other things, the car owner claimed £1,000 for a vehicle recovery charge from a company owned by his cousin in St Albans, when actually he drove the vehicle away. The two circa 21-year-olds in the vehicle were, he claimed, actually his father, who used the vehicle in his work as a driving instructor. As the case progressed, it turned out that the driver of the vehicle with which I collided was not the driver who attended court.
After the hearing, it was revealed that the same scammers had attempted, with success, similar claims on six previous occasions in just a few years, with the vehicle registered at the same address. My experience was a classic example of an induced motor accident—a “crash for cash” scam—but what happened to the fraudsters? The judge was very good in his summing up, but admitted that even though he wanted the police to investigate the perpetrators, there was little likelihood that that would occur. Taxpayers, who fund the court system, find that they pay not only higher insurance premiums, but in a secondary way, through the valuable court time taken up with disputing and proving that fraudulent claims are being made.
During my time with Liverpool Victoria on Monday I was shown various examples of fraudulent personal injury claims in which judges really did not get it. Refreshingly, though, there is some evidence that rare individual judges are taking positive steps to halt the onward and upward march of fraudulent claims, which cost the Government and the population of our country considerable sum each year—and all power to them. I trust that my right hon. and learned Friend the Member for Kenilworth and Southam (Jeremy Wright), my hon. and learned Friend the Member for South Swindon (Robert Buckland), and my right hon. Friends the Members for Derbyshire Dales (Mr McLoughlin), for Surrey Heath (Michael Gove) and for Tatton (Mr Osborne), along with their ministerial colleagues, will take note if passed details of this debate.
The list of most eminent places and their elected representatives that I have just elucidated helps to crystallise part of the problem we have in dealing with this issue: it cuts across a number of Government Departments. But that should not be a problem, now that it has been clearly identified; we just need someone, and their civil servants, to want to proactively take control and deal with it. I am sure that the good Minister, who represents Gosport, will have noted my plea, along with our other colleagues, and will pass it on to open ears in the corridors of power.
According to the insurance company Aviva, as well as Enterprise Rent-A-Car, City of London Police, Keoghs, Liverpool Victoria and many others who have contacted me and operate in the transport, insurance and judiciary sectors, a minor personal injury—mainly whiplash—claim adds at least £93 to the average annual motor premium. It is a £2.5 billion per annum problem, and around half of the costs relate to very minor injuries which require little or no proof of injury.
It would seem that we in this country have the weakest necks in the world—certainly in the parts of the country that are hotspots for such claims. Funnily enough, as a geographer, the correlation seems to be phonetic: most of the places begin with B—but I digress. It is such a serious issue that Volvo engineers from Sweden are most interested in our seeming propensity for whiplash injuries, especially as for some years their cars have been designed and engineered to minimise such neck complaints in minor and low-speed bumps and scrapes. Later in my speech I will return to how we compare to other nations in our likelihood to suffer from so-called whiplash injuries.
The culture of personal injury fraud is often fuelled and overseen by organised crime, and there are many examples of opportunistic claims that put innocent motorists’ safety at risk and inflate their premiums. Many fraudulent claims stem from nuisance calls made by some, but definitely not all, claims management companies, and—perhaps more worrying—by so-called marketing companies acting directly at the behest of some infamous and certainly not morally superior solicitors and law firms.
The so-called marketing companies are directly providing leads to claimant solicitors, underlining the fact that there is still too much cash in the system, despite the changes made in the Legal Aid, Sentencing and Punishment of Offenders Act 2012, known colloquially as LASPO. How are these solicitors and law firms and their partners in crime, the marketing companies, securing the supposedly outlawed trade in personal data—our email addresses, home and mobile phone numbers through which we receive unwarranted and unwanted emails, calls and texts exhorting us to make claims, as there is “£3,000 to £4,000” just waiting for each person who makes a personal injury claim? That is the nub of the problem.
We need to stamp out the cold calling, and quickly. I have suffered, as have many of my constituents and those of other colleagues present, and, indeed, those of colleagues who could not attend, such as the hon. Member for Newport West (Paul Flynn), who offered his support but is engaged elsewhere in the House. I believe that my hon. Friend the Member for Croydon South (Chris Philp) will speak about cold calling and its relationship to the myriad fraudulent claims in the country as a whole later in the debate.
Personal injury insurance fraud can be summed up as manifesting itself in a number of ways, and some aspects are easier to detect than others.
I congratulate my hon. Friend on securing this debate. Does he agree that one way forward might be for the insurance companies to provide a detailed dossier of information to the Solicitors Regulation Authority? It is clear from what he is saying that there is a systemic problem of which that authority should be fully aware of and perhaps look into.
I agree entirely with my hon. and learned Friend. In fact, some insurance companies are now acting more coherently, shall we say, and working with each other rather than always acting in competition. They have realised that the problem is not going to go away and has in fact got a lot worse.
The three most common strands of third-party fraud are: accidents fabricated or deliberately staged purely with a view to submitting false claims for compensation; fabricated personal injury claims where a genuine accident has occurred; and genuine accidents and injuries, but with aspects of the claim being fabricated or exaggerated.
I thank my hon. Friend for securing this debate. Does he agree that not only are the fraudulent claims he describes made at the cost of law-abiding motorists, but they cause a great deal of distress to the innocent victims, who see escalating charges and escalating amounts being claimed against them?
Indeed. I concur with my hon. Friend; she is entirely correct. Later in my speech I will describe the various other aspects that cost the nation, the taxpayer, the Government and organisations involved in this sector.
Fraudulent injury claims cause increasing costs in car insurance for consumers and businesses. The UK now sees more compensation claims for whiplash per car accident than any other western European country. As I have already said, we are known as having weakest necks in Europe. Efforts by the Government have had limited effect, and personal injury claims are now at a record high. In the first quarter of 2015, the number of personal injury claims made through the Ministry of Justice claims portal was the highest on record, with 13% more than in the same period for 2011-12, before LASPO was introduced. Claims data for 2015 so far show that, for some companies, 80% of all personal injury claims received were related to whiplash.
Liverpool Victoria estimates that, in 2015, at least 11% of the average car insurance premiums it provides can be attributed to paying for whiplash claims. That is a significant and unnecessary cost for consumers—our constituents. At Liverpool Victoria, 10% of claims handlers are employed purely to tackle fraudulent claims, at an annual cost to the business of £4.5 million to run the team. Those costs are ultimately paid for by customers, further increasing the cost of car insurance for individuals. Businesses are also affected by rising commercial insurance premiums for company vehicles. For small businesses in particular it is an unwelcome and unnecessary cost.
The Information Commissioner’s Office received 180,000 complaints about nuisance calls or texts in 2014-15—a 12% increase on the previous year. According to research that Liverpool Victoria commissioned in July 2015, each British person—importantly and unfortunately, this includes children—receives an average of 468 nuisance calls and text messages every year. We waste six and a half hours a year dodging calls, deleting texts and listening to phone messages that none of us wanted to receive. One in three reported receiving more nuisance calls and texts than calls from friends and family, and more than 80% of those who receive personal injury calls have never even been involved in an accident for which they could, if they wanted, have made a claim.
Fraudulent claims also have a cost for our GPs and the NHS as a whole. This is an area of great concern, as fraudulent claims are putting additional pressure on an already-strained NHS. Liverpool Victoria research carried out with GPs shows that GPs now see 116,000 people every month that they suspect are inventing or exaggerating an injury to claim compensation, which equates to nearly 1 million wasted GP hours every year. At this point, I will depart from my written speech and say that I may include the Secretary of State for Health in the list of eminent persons I read out earlier, because this is a serious issue for the NHS.
Claims farming generated by rogue solicitor firms and claims management companies is creating high volumes of fraudulent and exaggerated personal injury claims. Aged claims farming is the new norm, and it has increased since LASPO was introduced. Insurance firms have seen a significant increase in claims farming—the practice by which a claimant solicitor or a claims management company targets individuals with nuisance calls and texts to encourage them to make a personal injury claim. It now represents between 20% and 28% of all claims received by some companies each month. In January 2013, before the introduction of LASPO, the figure was 13% or below.
A high volume of farmed personal injury claims are being generated by just a few rogue solicitor firms. Despite evidence being passed to the Solicitors Regulation Authority, this behaviour has not been challenged, but it should be. Although the practice of claims farming is widespread, a minority of law firms are driving the problem: Liverpool Victoria’s analysis shows that more than 41% of suspected farmed claims that it received in 2015 were submitted by just 10 law firms.
Let me turn to the issue of cold calling and vishing. There is clear evidence, as my hon. Friend the Member for Redditch (Karen Lumley) said, that claims management companies and solicitor firms that cold call and text people are targeting vulnerable individuals. Claims management companies target individuals by calling directly from purchased marketing lists. The practice is widespread. Research conducted by Liverpool Victoria in June 2015 shows that the UK public collectively receive more than 60 million nuisance calls and texts every day—equivalent to 43,000 a minute. A significant proportion of the approaches are from lawyers or claims management companies trying to encourage individuals to make a personal injury claim.
Worryingly, the number of claims being made without the knowledge or consent of the claimant is increasing. A range of unlawful tactics are used to obtain and verify the data. In such cases, claims management companies act without formal instruction and the claimant does not sign any documents. Some claims management firms have even forged claimants’ signatures. The practice of vishing insurance companies is rife. As I heard on Monday, the number of vishing calls that London Victoria’s staff receive is rising: in just this year to October, it received more than 3,000 vishing calls.
I believe that the Government need to address the root cause of motor insurance fraud and customer harassment: the excessive cash in the system that creates unwarranted incentives. To deal with the problem, the Government should, first, introduce a minimum threshold for simple whiplash claims and replace cash compensation with rehabilitation, which would deal a fatal blow to those making nuisance calls and the “cash for crash” industry.
Secondly, the Government should ensure that magistrates, district judges and Crown court judges are aware of the cost of fraudulent claims to the nation and the need to take affirmative action, including dealing with uninsured drivers with parity. Why would somebody get insurance if they need to be caught and fined four times in a year to equal the cost of insuring their vehicle?
Thirdly, the Government should remove the civil court aspect of chasing a fraudulent claimant. We need to stamp out this pernicious crime. Only by instructing the Crown Prosecution Service to go after fraudulent claimants actively, backed up by the police, will we do so.
The real kicker of those three simple undertakings is that the vast majority of the voting public—certainly, 100% of law-abiding, insurance premium-paying drivers—would be utterly joyous and would commend us for doing some good in this place and making their lives easier and, ultimately, cheaper.
The challenge is that, as the Association of British Insurers’ premium tracker shows, the average motor premium for the second quarter of 2015 is £367, and it is increasing. Similarly, the number of whiplash claims is showing worrying signs of rising again. The Ministry of Justice’s claims portal shows that it has increased by 6% in the past nine months. There remains excessive cash in the system, which continues to fuel exaggerated and fraudulent personal injury claims, putting upward pressure on motor premiums. Organised and opportunistic crimes such as “cash for crash” continue to put motorists’ personal safety at risk while inflating all of our insurance premiums. Nuisance calls encourage fraudulent behaviour, leave law-abiding drivers vulnerable and mean that the staff of our insurance companies are encouraged—hounded, even—to breach data rules. Bogus data management companies and similar organisations, such as some data marketing companies and claimant solicitors, continue to plague motorists with texts and calls. They need to be regulated as a whole while the compensation culture and the opportunities remain.
According to the ABI, almost 130,000 cases of claims fraud were detected in 2014, totalling more than £1.3 billion—a 4% increase in value compared with 2013. In addition, there were 212,000 cases of application fraud. Between 2009 and 2014, the overall value of fraud detected rose by 57%. The insurance industry detects fraud in less than 2% of claims, but one in nine whiplash claims are fraudulent. The average cost of a bodily injury claim is £10,680, and the overall average for all claims is £2,649. Bodily injury claims make up 9% of the total number of claims, yet represent 51% of the total value of claims.
Many insurers have made it clear to me that they are taking action. Between 2005 and 2013, the number of UK motor accidents fell by 30%, but the number of whiplash claims increased by 62%, a large number of which are believed by the insurance industry to be fraudulent or grossly exaggerated. During that time, the average cost of a bodily injury claim increased by 73%. Indeed, one of Enterprise Rent-A-Car’s largest ongoing costs is the impact of personal injury claims as a result of accidents involving its vehicles. It is its third highest expense after fleet acquisition and personnel costs. Its fleet liability costs have been significantly impacted in recent years by the huge increase in personal injury claims. The growth is driven by low-value claims for soft tissue injuries.
We have a compensation culture problem that has not been dealt with and is not shared by many other European countries. According to Frontier Economics’ whiplash report, whiplash claims in France comprise only 3% of personal injury claims, in comparison with 94% in the UK. In Germany, the number of bodily injury claims has dropped in line with the fall in road traffic accidents. In Norway, most minor injury claims are handled without the involvement of a solicitor. In Sweden, a de minimis threshold means that symptoms must appear and be assessed within three to four days of the accident.
What can we learn from those examples? Whiplash claims are not as significant in other European countries, due to the much more stringent conditions that must be met before a victim can successfully claim compensation for a whiplash injury. In April 2013, 70% of personal injury claims following road accidents in the UK were for whiplash, compared with 30% in France and Denmark, 31% in Spain, 35% in the Netherlands and 68% in Italy.
Certain European countries have implemented a variety of measures to reduce the frequency of claims. In France, the diagnosis of a whiplash claim requires objective proof, based on more rigorous medical testing. Claimants are made to pay for an initial report on the injury. France also requires medical practitioners diagnosing whiplash to be specially trained in bodily injury diagnosis. Its small claims limit, which is greater than the UK’s, allows more claims to be settled without solicitors. I am also sure that it would not allow medical examinations to take place in Pakistan via Skype.
In Germany, a severity scale is used to assess the extent of the disability caused to a claimant by their injury, and compensation is awarded accordingly. Emphasis is placed on having a high level of proof of the injury when a claim is made following a low-speed collision, and injuries are diagnosed using clear objective criteria. Finally, contingency fees are permitted only in cases where the claimant cannot afford to hire a lawyer, meaning that lawyers are less incentivised to pursue cases.
In Sweden, claims for whiplash injuries can be made only if symptoms appear and are assessed within three to four days of the road traffic accident. There is a table of predictable damages, as used in the UK for workplace personal injuries and in Norway, meaning that claims are limited to the type of injury caused, increasing the efficiency and transparency of the handling of claims. Spain also uses a table of predictable damages, and it requires medical practitioners diagnosing whiplash claims to have specific qualifications, like in France.
Some companies and organisations believe that establishing an objective test for whiplash is imperative in reaching the core of the current problems surrounding insurance fraud. That would filter exaggerated and fraudulent claims out of the claims process, ensuring a reduction in the number of whiplash claims. At the same time, it would ensure that those who have genuine claims were not prevented from making them.
I want to go a bit further than Europe and refer to a taskforce report from Quebec, which is in Canada, for those whose geography might be a bit rusty. It was produced in 2001 and provided an objective basis for diagnosing whiplash. It is a little bit old, but it has since been endorsed by several other Canadian provinces. The task force divided whiplash-associated disorders into five grades. At grade 0, no neck pain, stiffness or any physical signs are noticed. Grade 1 involves complaints of neck pain, stiffness or tenderness only, but no physical signs are noted by the examining physician. Grade 2 disorders indicate neck complaints, and the examining physician will find a decreased range of motion and point tenderness in the neck. Grade 3 encompasses neck complaints, plus neurological signs such as decreased deep tendon reflexes, weakness and sensory deficits. At grade 4, people may suffer neck complaints and fracture or dislocation, or injury to the spinal cord. As I said, severity scales are also used in Germany, where the number of bodily injury claims has dropped in line with the fall in road accidents.
I recognise that the Government of which I am a part have taken and are taking steps to address such matters. I welcome, for example, their insurance fraud taskforce, set up by my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) in his former role, and I look forward to it reporting next month. I also welcome the fact that Her Majesty’s Treasury and the Ministry of Justice have commissioned a fundamental review of the regulation of claims management companies following concerns that CMCs fuel speculative unmeritorious claims for compensation and create a significant social nuisance through unsolicited calls and texts, misleading marketing and high charges.
However—I will state this clearly for the record—CMCs are only the tip of this fraudulent iceberg. The dodgy solicitors and law firms, some from the other side of the world, need to be investigated and shamed too. The consultation on the taskforce’s review closed last Friday, and I hope that its report will focus on customer outcomes, with fewer nuisance calls, and on having a new, more stringent and encompassing regulator, like the Financial Conduct Authority, to ensure consistency across the entire financial world and its markets.
I commend the City of London police’s model. The insurance fraud enforcement department was established in January 2012, when insurance fraud was reported to be costing £2 billion and the coalition Government were reducing police force budgets. It is a specialist police unit operated by City of London police and funded by the Association of British Insurers. Since its establishment, IFED has been responsible for more than 1,300 arrests and interviews under police caution, 172 convictions, 256 police cautions and 150 people being on bail to court or police, and 325 investigations are in progress, with new cases coming in every week. An example of IFED’s work was the bringing to justice of a Keighley pair, who were jailed for creating an insurance web of deception worth thousands of pounds. I will briefly summarise their deception. Those two fraudsters created insurance policies for people who did not exist and then submitted 300 false personal injury referrals worth £167,000 for made-up road accidents. Both have been jailed for four and half years
However, loopholes remain in the current personal injury referral fee ban and inducement laws. The regulation should include the data marketing companies, claimant solicitors and law firms, which are well known and easily identifiable, that are under the radar of the current regulator. We should outlaw insurance payments for whiplash injuries before proper medical examinations have taken place and concrete proof is provided. The key issue in the personal injury market is the level of financial incentives that still exist, despite the referral fee ban and the reduction in legal costs. It is still far too easy to make a claim for whiplash, and the rewards for doing so in terms of damages and legal costs have created and maintained the adverse behaviours that have prevailed since 1999 when no win, no fee was introduced in the UK. The small claims track for personal injury claims has been left unchanged for 16 years despite all other track limits increasing.
There is simply too much cash in the personal injury system, which is borne out by the continuing menace of the nuisance calls that we and our constituents receive and the fraudulent activity of some CMCs, so-called data marketing companies and some solicitor and law firms. Recent increases, which are way above current inflation rates, in the Judicial College’s suggested awards for minor injuries will just make matters worse. We need a more stringent and proportionate legal and regulatory regime that addresses the financial incentives in personal injury, cuts out the nuisance calls and ensures that all benefiting parties are regulated.
Although I am grateful to the Government for the steps they have taken to date, and to the Minister for taking the time to be here today to respond to this important debate, further reform is needed to keep insurance premiums for law-abiding motorists down. In addition to introducing a minimum threshold for simple whiplash claims and replacing cash compensation with rehabilitation, I would like to see, as a minimum, a ban on nuisance calls and better regulation of those who farm data, such as some solicitors, law firms, CMCs and marketing companies; the removal of all referral fees from the claims process; a limit of £5,000 on personal injury claims; a reduction in the limitation period for bringing minor whiplash claims from three years to 12 months after the accident; and the introduction of a table of predictive damages linked to a percentage of severity or disability to cut down unnecessary legal arguments. I note that France, Spain and Norway have fixed damages tariffs for whiplash-type injuries.
Once again, I thank the Minister and other colleagues for attending the debate, and I urge her to do everything that she can to deal with and limit fraudulent personal injury claims and to support the law-abiding motorists of Lincoln and the 30 million-plus drivers across the country. I believe that I have managed to outline a fair few potential processes that could be undertaken to reduce this blot on our road transport landscape. I hope the Minister and our friends in Government and the good offices of Whitehall will feel the same to a great degree.
I congratulate my hon. Friend the Member for Lincoln (Karl MᶜCartney) on securing today’s debate. I was keen to speak today because of a personal experience. A year or two ago, my wife and I were involved in a relatively minor road traffic accident on the M5. The car had some damage, but there was certainly no question of any personal injury. Despite that, my wife and I were bombarded on a more-than-weekly basis with phone calls and text messages that continue to this day.
I was annoyed and upset, not by the pestering, but by the person on the other end of the phone trying to coerce me into pretending that I, my wife or my children, who were also in the car, had suffered some form of personal injury when we had not. No matter how often I said, “We’re all absolutely fine. None of us has suffered any injury,” they would say things like, “I’m sure that you must have suffered some slight injury,” or, “You must feel a bit unwell,” or, “All you have to do is say you have a slight neck pain and I can get you £3,000.” I was being incited to commit blatant fraud. I am not alone in that experience. In fact, several other Members of Parliament have had similar experiences, as have friends and family outside the House.
I am appalled and outraged that in this country in 2015, companies encourage our citizens to commit fraud, and that so many of our citizens are going along with it because the system makes it easy, and pays them £3,000, £4,000 or £5,000. The first reason why I find the practice so objectionable is that it is morally corrosive. It encourages law-abiding citizens to commit a criminal offence. My hon. Friend touched on many of the other reasons why it is a terrible practice, and I want to reinforce one or two of them.
Most importantly, each and every one of our constituents, many of whom are hard-pressed financially, are paying almost £100 a year in extra insurance premiums because of this fraudulent activity. Families can ill afford that sort of money, in particular people on lower incomes. It is striking that despite the number of road traffic accidents having gone down by 30% in the past 10 years, injury claims have gone up by a staggering 62%—an extraordinary explosion. The total cost is £2.5 billion a year, which is a significant sum. Many honest businesses, such as Enterprise Rent-A-Car, which my hon. Friend mentioned, are struggling; its business model is under genuine threat, because car rental businesses have such a big cost imposed on them as a result of fraudulent claims that are damaging honest, law-abiding businesses.
The case for urgent reform is clear. I have six specific proposals for the Minister and will be grateful for her response. I am delighted to see that my hon. Friend the Member for Newark (Robert Jenrick), the Parliamentary Private Secretary to the Secretary of State for Justice, is present. I hope that he will pass some of our comments on to the Secretary of State.
My first recommendation or request echoes something my hon. Friend the Member for Lincoln said; it is for a complete ban on outbound calling to solicit personal injury claims, and on the use of information obtained from such calls. Work has been done to regulate that more carefully over the past five or 10 years, but I respectfully suggest that it has not so far had the desired effect. The only way to fix the problem is to have an outright ban on outbound calls, and on solicitors’ firms using the output from the calls; conceivably, someone could make a call from Bermuda, but sell the information to a law firm in Manchester.
I also echo my hon. Friend with my second request, which is that we pursue with criminal charges any claims management firm, solicitor or member of the public found to be making a fraudulent claim. In the hierarchy of criminal activity there are more important things for the CPS and the police to focus on, but the abuse is so widespread and £2.5 billion a year is such a large sum that we should actively pursue people through the criminal justice system. Until criminal sanctions are applied to the activity, there is no disincentive, and people will keep on trying to do this.
My third recommendation or request is that, for injuries to be compensated, there should be evidence that the alleged victim went to a doctor or sought medical advice within, say, a week of the injury being sustained. People turning up a year later and saying that their neck hurts is ludicrous if, when the accident happened, they did not seek medical assistance immediately. That would be a good way to cut out almost all such claims. If the claimant did not see a doctor within a week of the accident, I suggest that the claim simply be disregarded.
My fourth suggestion is that we use the system adopted in Germany and Canada, which have firm and objective sets of criteria. At the moment claims are being satisfied without someone having to produce any evidence except to say, “My neck hurts a bit.” Without further evidence, no cash compensation should be paid—no evidence, no compensation.
My fifth suggestion again echoes something my hon. Friend said—we seem to think alike on the topic—and that is that the claim limit be 12 months, rather than the current three years. My sixth and, as I am sure the Minister will be pleased to hear, final suggestion is that the limit for lawyers getting involved on a no win, no fee basis be increased from £1,000 per claim to £5,000. It has been at the £1,000 level for 16 years, and an increase is long overdue.
I am grateful for having had the opportunity to speak. I again thank my hon. Friend for the debate. I thank the Minister for listening attentively, and I will be grateful to hear her response to my six points.
I apologise, Mr Wilson, for being a wee bit late; I had a Committee to attend, but I rushed down straight away. I hope to return to it later, so I also apologise in advance if I have to leave before the shadow Minister, the hon. Member for Hammersmith (Andy Slaughter), and the Minister speak.
I congratulate the hon. Member for Lincoln (Karl MᶜCartney) on securing the debate. It is good for subjects that concern us all throughout the United Kingdom to be brought before the House. Every time there is a fraudulent insurance claim, we—those who do not do such things—pay for it. We have to highlight the issue. It is good to see the shadow Minister and the Minister in their places; I always look forward to the response, and I do so today.
Precise levels of fraud are unknown, but the Association of British Insurers recently published figures showing that 59,900 dishonest motor insurance claims were uncovered in 2013. I am sorry if that statistic has been reported already, but if not, I hope that it adds to the debate. That figure for claims was an increase of 34% on 2012 and represented a value of £811 million, itself up 32% on 2012. Those are staggering figures, given their effect on insurance. Dishonest claims comprise about 8% of all motor claims registered with the compensation recovery unit in 2013.
The real victims of insurance fraud are the hard-working, everyday people who have to pay inflated premiums because of the selfish actions of selfish individuals, who far too often get away with their criminal actions. Of all motor claims registered, 8% or nearly one in 10 is fraudulent. That is staggering—and that is only those claims that have been discovered to be dishonest. I am not saying that every claim is dishonest—I cannot say that, because I have no evidence for it—but that figure might be only the tip of the iceberg.
Around 775,000 motor personal injury claims were registered with the Department for Work and Pensions compensation recovery unit in 2013-14, compared with about 520,000 claims in 2006-07, only seven years earlier. That is an increase of almost 30%. My figures are different from those of others, who say there has been an increase of about 50% in claims. The increase has coincided with a 23% decrease in the number of road traffic accidents reported to the police. The stats prove the need for this debate.
We do not need to be rocket scientists to work out that something about the scale of that increase is suspicious, especially given the trend in road traffic accidents. That all adds to the evidence for my suggestion that the 8% of claims that have been found to be dishonest are, with respect, only the tip of the iceberg. If the trends continue, even higher premiums will result for law-abiding, hard-working people. Our role as parliamentarians is to ensure that we protect innocent people from the selfish criminals who make fraudulent claims for their own gain.
On 27 May I asked a question of the Secretary of State about personal injury compensation and what steps had been taken. To be fair to the Government—let us give credit where credit is due—they have responded and taken a number of steps. They have fixed the cost of medical reports and ensured that the provider of a report should have no direct link to the claimant. That might seem to be a small matter, but it is an emphatic and strong step to take. Also, since 1 June, solicitors have been carrying out a previous claims check on claimants before pursuing a personal injury claim. I am often reminded of “Only Fools and Horses” on television, when Uncle Albert falls down the hole where the beer kegs go in—but he has made a similar claim six or seven times before. The check will stop people making claims six or seven times, because the records will be consulted to ensure that it does not happen.
Another step taken is that, since 6 April, medical reports for claims have to be submitted through the new MedCo portal. Again, a process has been tightened up; it is another step in the right direction. Also, referral fees paid between lawyers, insurance companies and claims management firms are now banned—a clear step in the right direction, to ensure that things go the right way. Furthermore, from January 2016 there will be a new accreditation scheme for the medical experts who provide the medical reports. All those Government actions before and since my parliamentary question are excellent steps in the right direction.
I welcome the opportunity to discuss what is truly an epidemic, with an impact on each and every one of our constituents. I hope that it is something we can work together on, and that we can come up with a more robust and bipartisan solution that will see those selfish criminals dealt with appropriately. Regulations already exist, and the hon. Members for Lincoln and for Croydon South (Chris Philp) have indicated other steps they wish to be taken, which would help the Minister to tighten the screws a wee bit more. We need to do something about the massive increases in claims, but the regulations in place may not be as robust as we would like. The question is whether we need to create additional legislation or should simply push for more rigorous enforcement of current legislation. I do not know the answer, but I am sure the Minister can tell us.
I hope my contribution has been helpful, but I do know one thing: my constituents pay the highest insurance premiums in the whole United Kingdom. We do not have the special offers that appear on TV—on the bottom of the screen, it always says, “Northern Ireland not part of the deal”—and we get a wee bit narked about insurance premiums. We therefore need to step down hard on those who make fraudulent claims. If we can stop them, the premiums for everyone else will be lower.
It is a pleasure to serve under your chairmanship, Mr Wilson. I congratulate the hon. Member for Lincoln (Karl MᶜCartney) not only on securing this important debate but on his continued pursuit of the issue of insurance fraud during his time in the House. That included a parliamentary question in April last year to the Secretary of State for Justice regarding a judgment in the Supreme Court in a work-related injury case.
I recognise that, as hon. Gentleman said, the UK has the highest rate of fraudulent claims in Europe, which means that 11% of car insurance premiums are attributed to whiplash. I also recognise the role that nuisance calls play in inciting and inviting fraudulent claims. That is not to mention the cost to the NHS, which we across these islands want to protect and maintain.
I welcome the remarks by the hon. Member for Croydon South (Chris Philp), with whom I have not had the pleasure of debating before. He spoke of his harrowing experience and of being invited to claim, which was probably not at the forefront of his mind at the time. I also welcome the comments of the hon. Member for Strangford (Jim Shannon), who recognised that hard-working people pay the most as a result of the effect on premiums.
The Summers v. Fairclough Homes case in 2012 created the precedent that exaggerated or fabricated personal injury claims might be struck out in exceptional cases. The Government then proposed measures in 2014, which they said would mean that people would no longer be able to profit from exaggerated or fraudulent compensation claims, while victims with genuine cases could still get the help they deserved. However, as we have heard today, those measures have not gone far enough. Personal injury fraud remains an issue for our constituents.
We can define personal injury fraud broadly as any act intended to cause an insurance company to compensate for an injury that is non-existent, exaggerated or unrelated to an accident claimed for under a policy. More than 3 million people are injured in accidents each year—that experience is harrowing enough—be it in their home, in their car, at work or outdoors. In many cases, someone else is at fault, and the victims have the right to claim compensation.
As has been highlighted in the debate, however, there are many examples of injuries being overstated so that people can make a more lucrative claim, and we must clamp down on such actions. Statistics from the Association of British Insurers estimate that 59,900 out of 775,000 personal injury insurance claims related to road traffic accidents in 2013 were dishonest. If those figures are correct, it means that about 8% of claims were fraudulent.
Filing a fraudulent personal injury claim can have serious repercussions. Insurance companies can deny claims or drop coverage. Claimants can be liable to insurance companies for any money paid and for the costs involved in investigating the fraud. Criminal charges can, of course, also be brought against fraudulent claimants. Perhaps, however, that is not really tackling all the problems.
The effects of fraud are felt not just by those committing it on the off-chance they are caught out. The Association of Chief Police Officers estimates that fraud represents a £20 billion annual loss to the UK—the equivalent of £330 for every person in the country.
I thank the hon. Lady for giving way. She is making a sound case and an interesting argument. I also congratulate my hon. Friend the Member for Lincoln (Karl MᶜCartney) on securing the debate.
Perhaps the hon. Lady would be interested in the example of Sweden, which has found that the cost of whiplash injuries to insurers, and therefore the public, can be limited by restricting—time-barring, effectively—the time within which a claim can be put in to three to four days after the accident. Perhaps a week or two weeks would be a better proposal for time-barring people in the UK.
I welcome the hon. Gentleman’s comments. I recognise what he says about a limit on the length of time for making claims, but not every person might be able to claim within two weeks of experiencing an accident. We must consider such issues, but I do welcome the point that other European countries have imposed all manner of limits, sanctions and bans that have resulted in fewer claims.
As I was saying, the cost of fraud is equivalent to £330 for every person in the country, which is an astronomical figure that we should not impose on our constituents. However, in taking action against fraudulent claims, we must make sure we tread carefully.
Between 2008 and 2011, 1.9 million motor injury claims were made in England. In the same period, 75,000 claims were made in Scotland. That amounts to 25 times more claims being made in England than in Scotland. Given my legal experience, I acknowledge that protections must exist for individuals who have experienced accidents, and they should have the right to seek damages.
The current law does allow for some effective sanctions. Harsh judgments against those found to have claimed fraudulently act as a deterrent to others. Lower damages can be awarded for the non-fraudulent part of the claim, an action routinely imposed for punitive and deterrent reasons. Adverse costs orders can be applied in most cases, wiping out or even exceeding the value of any award. Contempt of court applications can be brought, leading to imprisonment. Criminal proceedings can be brought against those who bring fraudulent cases, leading to heavy fines or imprisonment. Those deterrents against personal injury fraud mean that our court systems already have the power to punish and deter fraudulent claims. We must make sure that any change to legislation does not impede fair settlements, access to justice or the efficient functioning of our courts.
I, too, congratulate the hon. Member for Lincoln (Karl MᶜCartney) on securing the debate. The subject is not totally unfamiliar; indeed, it was debated quite a lot in the last Parliament. I refreshed my memory earlier about a debate we had almost exactly two years ago—on 7 November 2013—entitled “Motor Insurance (Whiplash)”. I spoke for 30 minutes in that debate, and I refer hon. Members to that speech to spare them from having me repeat the whole of it now. Much of it is still relevant, which is sad in a way, and that might be an indictment of the Government for not having done more. Perhaps we can blame that on the coalition, which was a completely different organisation—there are no Liberal Democrats around to protest any more, so we can always blame them.
I dealt with this issue for five years, and I thought I had finally got rid of it, but my hon. Friend the Member for Kingston upon Hull East (Karl Turner), who is responsible for dealing with it, is away somewhere, so I am reprising the subject. The last time we debated it, the Under-Secretary of State for Justice, the hon. Member for North West Cambridgeshire (Mr Vara), had just taken over the brief, and now the current Minister is acquainting herself with it. It is an interesting subject, and perhaps I may say without any disrespect to the hon. Member for Lincoln that there was good and bad in what he said. I was with him for much of his speech, until at the end he drew conclusions that did not all perfectly derive from the facts at his disposal. One of the problems is that we do not always have the facts that we need on this issue.
I think we all detest cold calls, because we believe they are parasitical, and they are severely irritating. As far as I am aware, cold calls from law firms are already banned. Many of the cold calls that we receive come from call centres run outside the UK, which have become an industry in themselves. I do not think a single Member of the House, or indeed member of the public, would not want a crackdown on them, and want them to be banned and excluded. The problem is that it is difficult to do that, but I hope that the Minister will be able to say what the Government intend to do along those lines.
Even if one cannot ban calls emanating from outside the UK, there could certainly be a ban on any UK organisation, including law firms, using information derived from such extraterritorial calls. Will the hon. Gentleman join me in calling on the Government to institute such a ban?
As I have said, I believe that calls made in that way are banned. I will come on to say a bit more about law firms in a moment, but I think that would be the case for any such form of abuse.
The other area where I am entirely at one with the hon. Member for Lincoln is on referral fees. Again, the previous Government came to the issue late in the day. There were late amendments—on Report, I think—to the Bill that became the Legal Aid, Sentencing and Punishment of Offenders Act 2012, banning referral fees. We thought that that did not go far enough and would have liked them to be criminalised. I am afraid that the implementation by the Ministry of Justice was rather cack-handed and amateur for a while. That is getting better, and there has been a crackdown on claims management companies, which I welcome, as well as an extension of the ban on referral fees. Referral fees do not have any place in the British legal system. Those are the key ways of stopping such abuse.
The percentage of personal injury claims being made for whiplash has fallen, but Members are right to ask why the number of personal injury claims is increasing while the number of motor accidents is falling. One reason, undoubtedly, is greater use of advertisement, which encourages more people to claim. That does not necessarily mean that the claims are fraudulent, but it does mean that there is an industry encouraging the making of claims.
Thus far, so good, but the hon. Gentleman suddenly shoehorned into the end of his speech the conclusion that the small claims limit for personal injury should be extended to £5,000, the limitation period should be 12 months, and the quantum in such cases should be rigidly enforceable. I am afraid I cannot agree with him on that. It would be to attack a basic principle of English law—the principle of the courts’ discretion.
We already have clear Judicial Studies Board guidelines on quantum. There are reasons for the relatively short limitation period of three years. The hon. Member for Lanark and Hamilton East (Angela Crawley) mentioned that injuries are not always immediately evident. As for the old chestnut about raising the small claims limit to £5,000, I am entirely in agreement that after 16 years, if that is how long it has been, it is right to raise the limit proportionally by whatever the inflation rate has been during that time. It might mean taking the limit up to £2,000 or something of that order. Raising it to £5,000, however, would exclude 90% of all personal injury claims. For someone on a low income in particular, £5,000 is a substantial amount of money, and it is wrong for people in that situation not to have the benefit of legal advice. I see an ABI agenda there—that is what it always wants. Insurance companies are particularly keen on effectively taking lawyers out of the personal injury process, so that the relationship is between the victim and the insurer.
Before the hon. Gentleman moves on to that next point, may I stay with the previous point and say that I am no apologist for lawyers and solicitors or their firms, or for the ABI or any insurance company? In fact, I am no friend of any insurance company. I am here, as are many other hon. Members, because our constituents’ premiums rise every year. Unfortunately, no harm comes to insurance companies when premiums go up to pay for fraudulent claims, because they just pass on the costs in their turnover figures to the little people at the bottom of the scale. I see where the hon. Gentleman is coming from, but I was trying to say that we need to root out the lawyers, solicitors and claims management firms that use the moneys available in the system to feather their nest.
I entirely accept what the hon. Gentleman says, but I am perhaps slightly more sceptical about insurance companies’ use of data. There is an idea that whenever premiums fall, as they have recently, that is because firms are cracking down on fraud, and when they rise it is because of an increase in fraud. The reality of finances, insurance companies’ activities and fraud is far more complicated. For many years, the figure for fraud that was often given was 7%. I do not know whether it has changed—I think the figure of 11% was quoted in the debate in relation to one insurer—but 7% is a high figure for fraud. Of course, that still means that insurance companies estimate that 93% of claims are non-fraudulent and come from genuine victims. However, I have heard the figure for the percentage of claims that are partly or wholly fraudulent put as low as 1%; I have also heard it put much higher than 7%.
I need to clarify those statistics, because the percentages relate to identifiable fraud. That is not to say that all claims are fraudulent—far from it. None of us minds people who have really been injured receiving their just compensation. Fraud that is easily identifiable, which the insurance companies chase down, is at the level the hon. Gentleman is talking about, but that is not to say that the 93%, or any other residual percentage, represents bona fide claims. There might well be other fraudulent claims within those percentages.
I do not want to argue about statistics endlessly, given that part of my argument is that the statistics are not robust. I am sure that the hon. Gentleman looked at the briefing for the debate by the Law Society, which is of course the professional body for solicitors. There are concerns that insurers use figures about levels of fraud as it suits them.
The point that concerns me is that the remedies that insurers resort to are, in some cases, more likely to encourage fraud. The principal one is third-party capture. There is an increasing trend for insurers to contact victims directly, offer a settlement and discourage them from contacting solicitors—and, if they have contacted them, to ask for information about that. They are not entitled to that information, but rather in the manner of claims managers who, as we have heard, use bullying behaviour to try to substantiate fraudulent claims or exaggerate claims, I am afraid insurance companies increasingly approach people in the same way, to try to get a quick, early settlement without medical reporting or professional advice. That may well minimise the value of the claim—I have no doubt that that is the intention—so someone who has a genuine and possibly quite serious injury may settle for a relatively trivial sum of money. However, it may also encourage fraud, because if there is no medical report or lawyer to act as an arbiter of whether a claim is genuine, the insurer, for commercial reasons, might settle a claim that could well be fraudulent. We should be worried about the growth of third-party capture, which would undoubtedly be massively encouraged if small claims were lifted disproportionately.
I am not saying that there is not bad practice by law firms, because there certainly is. I am talking not even about dubious practice, but about sharp practice in marketing skills. However, as one would expect, the overwhelming majority of solicitors act in a proper and professional manner. They have the ability, through the askCUE system, to determine whether someone who comes to them with a claim has claimed previously, and they are encouraged to make such checks to see if that is happening.
I sound a note of caution not because I think that anything raised by the hon. Member for Lincoln is inappropriate. It is just that, as in many things, there is a balance to strike. I was glad to hear the hon. Member for Lanark and Hamilton East speak about victims. Let us not forget them in this case. Political parties often speak up for victims of crime, but victims of accidents are also victims. I would not want to throw the baby out with the bathwater and say that genuine victims of accidents should not get access to justice or be properly remunerated.
I baulk at the constant refrain about a compensation culture. Time and time again it has been shown, including by the Government’s own experts, that no such culture exists in this country. On the contrary, recent consumer surveys have shown that only 17% of people say that their default position would be to seek compensation after receiving poor treatment. I do not think it is naturally British to think that, as a consequence of poor treatment or customer service or even an injury, the first thing one would do is immediately go to claim compensation.
The hon. Gentleman may well be correct, but the problem is that ordinary, law-abiding citizens are being harassed and incited by claims management companies to invent claims—I stand here today because I am one such person. That is why the Government need to go beyond the action they have taken already. I hope that he agrees, given that he used to practise personal injury law.
I did indeed practise personal injury law, but, for the avoidance of doubt, I should say that 90% of my practice was for insurers, so I do not think I can be accused of parti pris. I can see it from both sides of the fence, and if I am talking about claimants and victims, that is just to give a bit of balance to the debate.
I entirely agree with the hon. Gentleman, and I hope that, when we hear from the Minister, we will hear what is being done specifically to crack down on those calls. I do not want to put the hon. Gentleman on the spot about whether, in his case, he was able to report to either the MOJ or the police that he was being suborned in such a way, but I hope that people do that. If there were a couple of high-profile cases, perhaps instigated by Members of Parliament, in which pestilential claims management companies and cold callers were held to account, that would be a tonic for reducing the practice substantially. If the Minister can shed any light on what the Government can do on enforcement, I will be pleased to hear that.
We must look at both sides of the argument. We have to take action based on evidence, and we have to realise that there are many vested interests. Yes, the claims management companies have interests and we must be on guard against fraud, but we must also be aware of the interests of the insurance industry, which are not always at one with those of the motorist or consumer. It does not always follow that what the industry asks for is beneficial not just to victims or potential victims, but to motorists as a whole. I hope that we can crack down on fraud and relieve the consumer of the burden of calls—I get them myself on many issues—but I also hope that, on this as on other matters, we will bear in mind that the interests of victims and those with meritorious claims for personal injury should be respected.
May I say what a delight it is to serve under your chairmanship, Mr Wilson? I add my praise to that already heaped on my hon. Friend the Member for Lincoln (Karl MᶜCartney) for securing this important debate on personal injury fraud and its impact on individuals and motor insurance premiums. He has been a dedicated and tenacious campaigner on this important issue.
I will state at the beginning that I am not the Minister with responsibility for this matter in the Ministry of Justice. That honour falls to my colleague, Lord Faulks. I will of course make sure that all the points made today that I am unable to cover are responded to by my noble and learned Friend, and that he is well aware of all the suggestions made by hon. Members from across the House.
My hon. Friend the Member for Lincoln has a number of concerns about personal injury fraud and nuisance calls in particular, which both he and my hon. Friend the Member for Croydon South (Chris Philp) mentioned. Those pernicious calls cause annoyance and distress to many people, particularly the elderly and vulnerable. I will address that in due course. First, I would like to say a few words about some of the measures and initiatives introduced by this and the previous coalition Government.
We have been, and continue to be, committed to tackling the problems in this market. There have been some real challenges for the Government in trying to put right the imbalances that have led to the disproportionate growth in personal injury claims. We know, as many Members have articulated, that reported road traffic accidents fell from approximately 190,000 in 2006 to about 140,000 in 2013, when the previous Government began to introduce their reforms. That is a reduction of more than 20%, yet at the same time the number of road traffic personal injury claims rose from about 520,000 in 2006 to 760,000 last year—an increase of about 50%. That is a clear indication, if one was needed, that there is a problem and that the Government should consider further reforms to combat this distasteful culture, which we believe is in part being driven by the constant barrage of phone calls and texts messages that my hon. Friend the Member for Croydon South so powerfully described.
The Government accept that many personal injury claims are genuine, but it is also clear that many speculative, exaggerated and fraudulent claims are being made. Sometimes it is difficult to tell the difference between the two, but it is not right that people who try to cheat the system should be allowed to get away with it and, as so many Members have said, thereby force up the price of motor insurance for honest, law-abiding motorists. There are considerable costs in dealing with such claims, which have a significant impact on the cost of premiums. According to the ABI, the annual cost to the industry from whiplash claims is £2 billion, which, as has been said, adds some £90 to the average motor insurance premium.
I will pause there and go back in time to set the scene. My hon. Friend the Member for Lincoln is a long-standing member of the Select Committee on Transport and he will be aware that just over five years have passed since Lord Justice Jackson published his review of the cost of civil litigation. That may seem quite a long time ago now, but the previous Government and this one have been busy ever since with a substantial programme of reform.
The Jackson reforms, introduced through the implementation of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, were a key achievement in addressing bad behaviours in the personal injury sector. The reforms introduced a ban on the referral fees that many lawyers, solicitors and claims management companies used to buy and sell claims. We agreed that the system of no win, no fee arrangements was not fit for purpose—that, in fact, it had the perverse effect of encouraging litigation—and so reformed the system to return balance to it, making sure that costs were no longer all heaped on defendants and that claimants had a financial stake in their claim. Our reforms were explicitly aimed at controlling costs and discouraging unmeritorious claims, while enabling genuine cases to be pursued, although of course at lower cost than before, which is why we also put in place measures to encourage earlier settlement.
Speculative and unnecessary whiplash claims are some of the most unmeritorious of all claims, as many Members mentioned. Following a Downing Street summit in February 2012, the Government committed to introducing reforms to tackle the number and cost of whiplash claims. In response to that commitment, the Ministry of Justice has worked with stakeholders to produce a wide-ranging set of reforms to introduce much-needed independence to, and improve the quality of, the medical evidence used in such cases.
The Minister has mentioned the notorious insurers’ summit, when the Prime Minister invited the major insurance companies to 10 Downing Street, but no one representing the claimants’ side. Does she think that that might have been a mistake? Does she agree that the Government should listen to both claimants and defendants?
We can dwell on the past, but the hon. Gentleman is absolutely right that we need to listen to all sides in the argument. As the hon. Member for Strangford (Jim Shannon) pointed out, important steps have since been taken on medical reports. The first phase of the reforms included measures to reduce and fix the cost of initial whiplash medical reports at £180, to allow defendants to give their account to the expert for the first time, to discourage insurers from making pre-medical offers to settle, and to ban experts who write the medical reports from also treating the claimant.
I am sorry to interrupt the Minister, but she is tempting me. She just mentioned third-party capture, but if the Government really want to stop it, why should it not be banned? I think she is about to mention MedCo. That has been a disaster, which is why we are having a full review only a few months after its introduction.
If the hon. Gentleman will hold his horses for just a moment, I will move on to some of those issues. MedCo has introduced a robust new accreditation scheme for medical experts, who need to attain accreditation by 2016 or they will be removed from the system. We hope that that will begin to take effect, but a further reform to control fraudulent claims at source was implemented on 1 June 2015, as he will know. Claimant lawyers were given access to insurance industry data and must now check the number of claims their potential client has made before accepting the claim.
The Government are particularly pleased that stakeholders put aside their differences to develop a consensus on sharing data and improving medical evidence. Such a consensus can only be positive for all involved and we look forward to continuing to work closely with stakeholders. The Government have also taken firm action to ban both lawyers and claims management companies from offering claimants inducements to bring frivolous claims. Although it is still early days in terms of monitoring the impact of the reforms, Government figures show that the number of whiplash claims has gone down by around 70,000 since 2011-12. That is a good start, but we remain concerned about the number of claims made and their impact on the cost of motor insurance premiums. Too many claims are still being brought inappropriately, often because people are encouraged and pressured to do so by unscrupulous lawyers or CMCs.
On 2 December 2014, the Chancellor of the Exchequer and the then Justice Secretary jointly announced a new insurance fraud taskforce. The taskforce will make recommendations to reduce all types of insurance fraud, to lower costs and to protect the interests of consumers. The Government are committed to tackling the perception that insurance fraud is a victimless crime. It is vital that people understand that making a fraudulent claim is not a legitimate way to make money. The taskforce is currently considering its recommendations, which the Government will consider carefully with a view to taking firm action.
My hon. Friend the Member for Lincoln mentioned the practice of “cash for crash”. The insurance fraud enforcement department is a City of London Police unit set up to tackle insurance fraud nationally. The £3 million annual cost of the unit is funded by ABI members through an industry-led compulsory levy. The unit is leading the fight against “cash for crash” gangs, and has caught and prosecuted many perpetrators of that distasteful scam over the past three years. It will continue in that work.
The Government have also been serious in our commitment to driving out bad practices by claims management companies, as is clearly demonstrated by the recent package of reforms to protect consumers who use the services of a CMC or who are subjected to its marketing practices. The reforms will also help organisations that are on the receiving end of high volumes of calls or fraudulent or unsubstantiated claims. The measures are transforming how the MOJ’s claims management regulation unit does its job. Members will be interested to hear that in the last year, 93 CMCs were investigated, 105 CMCs had their licences removed, 296 were issued warnings and 454 audits were conducted. Tackling fraud and unauthorised activity in the claims management industry has been, and will remain, a key priority for this Government.
The CMR unit works closely in partnership with both industry fraud bodies and the police to identify and deal with CMCs engaged in insurance fraud. That work has been instrumental in the successful prosecution of criminal organisations. My hon. Friend the Member for Lincoln rightly identified nuisance calls as a well known route for spurious claims farming. The CMR unit makes sure that CMCs offering claims services do so legally. That is why we introduced tough new rules in October last year to put in place a stronger requirement to make sure claims are properly substantiated before being pursued.
We also strengthened the CMR unit’s enforcement tools in December last year with a new power to impose fines on CMCs. So far, three companies have been fined more than £800,000 for unlawful unsolicited marketing and coercing clients into signing contracts before taking unauthorised payments. That sends the powerful message to unscrupulous fraudsters that the Government take this issue seriously and will take firm action against them.
The claims industry is a fast-moving market. Practices continue to evolve, and the Government will monitor the market and respond with further reforms, as necessary, to provide better protection for consumers and the public. The Government are also looking to build on the work of the CMR unit by undertaking a fundamental review to consider what powers and resources are required for a tougher CMC regulatory regime. The review is due to be completed in early 2016.
I will now answer the very useful six points raised by my hon. Friend the Member for Croydon South, as some of them will be included in that review. He talked about banning of outbound calling and the use of personal injury claims data gathered from those calls. We need to strike a balance between ensuring that consumers are adequately protected and ensuring that a direct marketing industry can continue, as—although this was not necessarily the case in his experience—it is a legitimate activity when done properly. We need to focus on the companies that are breaking the rules rather than penalise legitimate businesses, and to make sure that companies comply with the regulations. We have made it easier for the Financial Conduct Authority to take action against some of those companies, but we will continue to look at that, particularly in the light of what he has outlined today.
I understand that the Government have taken action to regulate outbound calls more carefully. My fear is that that regulation unfortunately has not had the intended effect and that cases like mine are continuing to occur. I suggested an outright ban because I feel it is the only way that we will be able to stamp out a terrible practice that I myself directly experienced.
My hon. Friend is very persuasive, and I will definitely ensure his thoughts are passed on when the review is conducted.
My hon. Friend talked about criminal pursuit of anyone making fraudulent claims. That measure was introduced earlier this year in the Criminal Justice and Courts Act 2015, which requires the court to dismiss in its entirety any claim where the claimant has been fundamentally dishonest. That means dishonest claimants can now no longer receive a payout if they have been fundamentally dishonest, even if a small part of their claim is in fact genuine. Insurers then have the option of pursuing a criminal prosecution for fraud.
My hon. Friend said medical advice should be taken within a week of an accident. In 2004, the Government considered including such changes to the civil procedure rules to ensure that medical examinations and reports were completed before a claim was produced. We have introduced the rules I have spoken about to discourage such behaviour, but we will keep the matter under review and continue to work with key stakeholders. We need to look at how we can tackle the issue effectively.
My hon. Friend asked whether there should be an objective evidence base. The Government remain concerned about the number of claims made and have done much in that area, but we accept that more can be done. We are open to any suggestions put forward by interested stakeholders and will consider all the points he has raised.
Finally, my hon. Friend talked about the 12-month claim limit and the no win, no fee limit of £6,000. We understand that both those issues will be considered by the insurance fraud taskforce, which will be reporting shortly. We look forward to seeing its recommendations and will respond accordingly.
The Minister talked about a £6,000 limit. If she is talking about the possible £5,000 limit for small claims in PI cases, the Government have already looked at that two or three times. They have had very strong advice, including from the Transport Committee, that that is not the way to go. Is she saying that that matter is going to be revived?
As I say, the taskforce has been set up to look at all the issues, and I believe it may be considering that limit, but I will write to the hon. Gentleman with clarification if that is not correct.
The Chancellor announced proposals in the July Budget to introduce a cap on the charges that CMCs can apply to consumers. We are looking in particular at restricting bulk PPI claims to more proportionate levels and will consult on how that will work in practice later this year. A cap on charges will, we believe, help to reduce incentives for CMCs to collect marketing leads, resulting in a reduction in the number of speculative calls made.
I would like to draw Members’ attention briefly to other measures taken by the Government to tackle the issue of nuisance calls. In March 2014, the Government launched an action plan to tackle the problem, asking the consumer organisation Which? to lead a taskforce on consent and lead generation in the direct marketing industry. The taskforce made a number of recommendations, including giving the Information Commissioner’s Office powers to hold to account senior executives who fail to comply with the rules on marketing. The Government are currently considering those recommendations.
The Government have made it clear that it must be easier for the ICO to take action. The ICO no longer has to prove substantial damage or substantial distress caused by a company before action can be taken. Since 2011, it has had the power to issue penalty notices of up to £500,000, and in September 2015 it issued a penalty of £200,000 against a company that made more than 6 million automated calls to consumers—the highest penalty ever issued for nuisance calls. The ICO has also issued a penalty of £75,000 against an organisation that claimed to offer a nuisance call blocking service but was instead making unsolicited live marketing calls to members of the public—the mind boggles. The ICO continues to take its enforcement responsibilities seriously and has 66 cases currently under investigation.
The Government are also exploring options to provide call-blocking devices to vulnerable customers, and we will consult shortly on legislation to require all direct marketing callers to identify themselves. That will enable consumers to determine who is calling and to report unwanted calls to the regulator. I ought to make it clear that the Government have not ruled out further reform to this market.
Before my hon. Friend the Minister finishes her remarks, may I say that I welcome the courteous and informative comments she and everyone else who has taken part in the debate have made, including even my hon. Friend the Member for Newark (Robert Jenrick)? He does not to get to say anything in his role as Parliamentary Private Secretary, but it was good to see him here, providing very useful information.
The Minister mentioned that some of these companies are fined. Unfortunately, the directors behind the companies often have what are known as “phoenix companies” waiting in the wings. The Government need to take direct action on the individuals who are at fault for carrying out these pernicious acts with regard to cold calling. I make that plea as a final comment in this debate.
That is a valid point. These individuals need to be named and shamed for what they are and, indeed, what they are doing; my hon. Friend is absolutely right.
We have not ruled out further reforms to this market. I hope I have reassured hon. Members today that the Government take this subject very seriously. We remain committed to continuing the reform process to the benefit of all and we want to work with all stakeholders to achieve that.
Question put and agreed to.
That this House has considered personal injury fraud.