Compensation Culture – A Solicitor’s Viewpoint


The first thing to consider is what do people really mean when they talk about a compensation culture? Are they referring to a compensation culture amongst accident victims of exaggerating or making up their injuries in order to claim compensation, or are they thinking about the claims industry and the No Win/ No Fee compensation culture of dreadful TV adverts, nuisance telephone calls and unwanted texts? I am sure most of you would say both and whilst I agree; I think it’s important to put the accusations of a compensation culture of false and exaggerated clams into some context.

From our experience at Fylde Law in dealing with thousands of personal injury claims from both before and after the introduction of No Win/No Fee Agreements in 1999, it’s fair to say that except in the area of Road Traffic Accidents (more on those later), we have noticed very little difference. For sure, there are a small percentage of our clients who try to make fraudulent claims, but this was always the case. Most Personal Injury solicitors will be familiar with the drunken man who falls over on a Saturday night and the footballer who breaks his ankle playing football and who then tries to lay the blame for his injury on the nearest section of dangerous pavement.

As experienced solicitors, we are alive to this and it’s not difficult in most cases for us to find out the real truth before any damage is done. Nevertheless, such claims are extremely frustrating. This is not only from the point of view that one of our clients has tried to use us to carry out a fraud against a local council, but also because we have often wasted tens of hours of own time and sometimes hundreds of pounds of our own money, in administering these claims.

Our perceptions appear to be supported by statistics as well. Research published by the government run Compensation Recovery Unit (with whom every compensation claim must be recorded), concluded that the number of compensation claims has been relatively stable since 1996-1997. The TUC reports that awards of compensation for Work Related Illnesses have actually fallen by 60% between 2001 and 2013.

Where things have changed is in the area of Road Traffic Accidents or RTAs. Most of you will have heard of a crash for cash accident, where a car accident is deliberately engineered in order to create compensation claims for the occupants of the car. Fortunately, such incidents are very rare.

It’s more common for a fraudulent claimant to claim he or she was a passenger in a legitimate car accident, or for a uninjured person to claim they are suffering from whiplash. The imperceptible nature of a whiplash injury means that it’s possible for a determined fraudster to fake an injury and claim compensation. It also makes it difficult for solicitors to identify fraudulent claims of this type.

Nevertheless we do run checks on our clients and we try to weed out any claims we believe may be fraudulent. Our experience of doing this shows that in every case, the fraudulent claim has been sent to us by a Claims Management Company or a CMC, which brings us nicely to the Claims Industry as a whole and its part in the compensation culture.

But first, a little history – CMCs first came to prominence in 1999, when the government abolished Legal Aid for personal injury claims and introduced No Win/No Fee Agreements. Their idea was that solicitors would be paid an extra fee (a success fee) on top of their normal costs if they won a case and that the success fee would be used to help cover the costs of the claims that the solicitor would lose. It was expected that solicitors would take on all cases where there was a chance of success and that all injured people would have a chance to bring a claim, without it costing them anything if they lost.

CMCs instantly realised that they could make a lot of money selling claims with a high chance of success to solicitors, who were about to start getting paid handsomely for the claims that they won. Within months of the changes, slickly produced TV adverts from Claims Direct filled our screens, swiftly followed by ads by The Accident Group, as well radio campaigns, newspaper adverts and leaflet drops from a thousand other prospective millionaires. Almost overnight the compensation industry and its culture of the hard sell was born.

Almost overnight, every personal injury solicitor in the land found that his or her clients appeared to have deserted them. Accident victims rang the 0800 numbers flashed in front of their eyes, rather than their local solicitor and survival meant paying the exorbitant fees asked by the CMCs.

Over time the claims industry mushroomed into the monster that we see before us today and it wasn’t just the CMCs that were looking to get a slice of the action. Insurance companies realised that they had a huge captive market of drivers they could tap into. They found that if one of their drivers reported that they had been innocently involved in an accident, they could ‘appoint’ a solicitor to represent them. Drivers didn’t question this and were not told that nobody has a right to appoint a solicitor for somebody else. Meanwhile, the insurance companies would make millions of pounds every day, selling the claims to solicitors for a fee that often represented between 60% and 70% of the money the solicitor was likely to get paid at the end of the case.

The enormous fees being asked for by insurance companies and CMCs drew more and more shadier businesses into the industry. Some operators realised that if you sent out 10,000 daft texts advising that there was £3,000.00 waiting for you for your accident claim, then a few people would respond. It only takes one of those people to have a valid compensation claim and the company is in profit. It’s the same story for the cold callers that plague us.

With the kind of profits being made by CMCs, many celebrities have been only too keen to lend their name to the race for claims. Foremost amongst these celebs is Esther Rantzen, who if industry rumours are to be believed, pockets hundreds of thousands of pounds every year for lending her approval to one of the leading claims brands. Interestingly, for a ‘Consumer Rights’ champion, the CMC Esther recommends was one of only a few brands not to guarantee payment of 100% compensation to its clients.

It’s not just the CMC’s and big players that got wise to the compensation culture. Physiotherapists, Osteopaths and Medical Agencies have all become savvy to loopholes where money can be made. Only this week, I received an invoice from a physiotherapist charging me £50 for supplying three photocopies of one of my clients notes. I’ll do the maths for you – that’s £16.66 per photocopy!

With all this going on, the cries for the compensation culture to stop became louder and louder. The government listened and appointed Lord Justice Jackson to investigate. His findings were long and complicated, but at times were swiftly to the point – “there is too much money sloshing through the system” he cried and his solution was simple – ban referral fees to CMCs, turn off the taps to the solicitors and make injured people pay for their legal costs out of their compensation.  From the 1st August this year, the new regime was introduced and with it came the hope that the endless TV and radio adverts, the annoying texts and the cringeworthy promises to “get you the compensation you deserve” would come to an end.

No, they haven’t! I hear you cry, but these are still early days and there are a lot people who have made a lot of money, who don’t want to walk away just yet. Time will tell..

But what does the future hold for compensation claims? Well, from the viewpoint of a personal injury solicitor, the future looks pretty bleak. Except in rare circumstance, accident victims will no longer receive a full award of compensation. It represents an injustice, rather than justice that an injured father who lost 12 months of wages because of his injury will only get 9 months wages back, or that an injured person will only get part of her medical bills paid for because she had to pay for part of her own legal bill out of her compensation.

The bigger CMCs have not gone away. They are still on the TV. They have simply merged with the bigger solicitors firms and will still make lots of money by using unqualified staff to administer personal injury claims.

As for that question that’s been troubling me. Am I an ambulance chaser? Well the short answer is an emphatic no, but I think as one of the many solicitors that have signed the cheques to fund Claims industry, I have to accept some responsibility for the irritations that you have had to put up with and for that I am very sorry.


Compensation Culture - A Solicitor's Viewpoint 1

Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.

Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.

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