There are more people in the UK making compensation claims following car accidents than ever before. Many believe the surge in reported claims is due to the "compensation culture" that it is allegedly taking hold in the UK.

In actual fact, recent studies have suggested that there are in fact less general injury claims being made now than was the case in the year 2000. In many legal sectors (such as employers liability) the number of claims are declining and compensation awards are stagnating. The one area that bucks the trend is the road accident sector and more specifically whiplash claims It is now very common for innocent victims of road crashes to make a claim for any injury they have sustained because of the legal cover that has become readily available with most motor insurance policies. It is very easy for people to make a claim following their accident. In days gone by the injured party would have had to go looking for a solicitor, but nowadays, the solicitor tends

to find the client having been instructed to do so by the motor insurer.

There is a huge paradox within the industry that most member of the public are unaware of. Insurance companies themselves actually generate more than 80% of all road accident injury claims, through their legal expenses insurance referral mechanism.

The legal industry, particularly solicitors, receive a very bad press in terms of how they provoke and nurture the compensation culture. By way of redressing this imbalance, it is important that the public are made aware of how the legal expenses insurance system operated by ALL insurance companies in the UK actually works.

If a policyholder pays for legal expenses insurance, they have direct access to panel solicitors handpicked by the insurance company. If the policyholder has an accident and is injured, then the insurers will forward any non fault claim to their chosen solicitors in order for a personal injury case to be pursued. At this point, before a solicitor can take the case forward, many will pay the insurers any referral fee, which can run into hundreds of pounds. The injured claimant is made aware of the payment in the solicitors initial correspondence (to comply with solicitor regulations). It would be fair to say that insurance companies make many hundreds of thousands of pounds worth of profit as a result of this arrangement.

When you consider that the vast majority of all the motor insurance personal injury claims and generated by such a mechanism, it is very difficult to look sympathetically on the insurance sector when they complain about the burgeoning cost of compensation claims. Essentially, the insurers have found a way to make a substantial amount of top line profit but ironically in doing so create a huge number of compensation claims that might not have actually been made in the first place. The cost to the insurance industry far outweighs the benefits of recouping a referral fee on this basis, but the practice is widespread and well entrenched within the motor sector.

There are many other types of insurance that offer legal expenses cover where similar referral process is are adopted. It is however the motor insurance sector where this referral process hits hardest both in terms of the volumes of business and the impact that such claims have all of the average motorist. It goes without saying that premiums are increased every single year by most insurers and the

most common reason given for the uplift will nearly always be soaring claims costs.

The next time you receive your annual insurance renewal and your premium has risen sharply, you might want to bear the above in mind.