High street retailers, including Argos, ASDA, Ford, and Whitbread PLC, Lloyd’s, business organisations, and risk management bodies have joined forces with the Association of British Insurers (ABI) in calling for reform to Britain’s ‘have a go’ compensation culture to ensure that genuine claimants get a better and faster deal. The initiative comes on the day that the ABI publishes a report highlighting how the compensation system is failing too many genuine claimants, and the high price being paid by consumers, taxpayers and businesses.

The growth in spurious and exaggerated personal injury claims and excessive legal costs has resulted in higher costs for consumers, local authorities and the NHS, as well as making it harder for genuine claimants to get compensation. The number of personal injury claims received by insurers leapt 72% between 2002 and 2010. Figures show that people get more compensation, typically an extra £289, quicker if they deal with an insurer and not a lawyer.

The UK’s broken compensation system heaps costs onto consumers, taxpayers and businesses:

• Higher insurance premiums for UK consumers, who pay £2.7 million a day to claimant lawyers through their motor insurance premiums.

• All taxpayers are affected through the heavy cost burden on local authorities and the NHS. In 2010/2011 alone, the NHS paid out over £257 million in lawyers’ fees as a result of claims.

• Higher business costs include one national supermarket whose personal injury claims costs is the equivalent of the annual turnover of five of its stores.

Canada, Australia, Germany and Ireland have acted to reform their compensation systems. In Ireland, the cost of motor insurance fell by 16% following reform, while in Germany legal fees average 300 Euros compared to £1200 in the UK.

The ABI report Tackling the Compensation Culture: The Legal Aid, Sentencing and Punishment of Offenders Bill highlights why action is needed now to tackle:

• Aggressive activities of some claims management firms that lead to the public receiving unsolicited texts and cold calls encouraging them to claim.

• The ease by which fraudulent and exaggerated whiplash claims can be made.

• Excessive legal costs, sometimes exceeding the level of damages. Legal costs for small value claims in the UK can be up to double those elsewhere in Europe.

• The lack of any financial incentive for claimants in ensuring costs in bringing a claim are reasonable.

• The selling of personal information of potential personal injury cases (referral fees) that increase costs without adding any value.

Otto Thoresen, ABI’s director-general, said:

“Our current civil litigation system is failing too many genuine claimants – the very people it should be protecting. Compensators, such as insurers, retailers and local authorities, are committed to paying genuine claimants as quickly as possible. But too often this happens despite the system, not because of it. People can get more money quicker by claiming directly from insurers, but ambulance chasing lawyers can still manipulate the system.

“The position is not irreversible. Other countries have taken action and we must do the same. Excessive legal costs must be reduced. The Legal Aid, Sentencing and Punishment of Offenders Bill provides a much-needed opportunity to mend our broken compensation system to ensure a better deal for genuine claimants, taxpayers, local authorities, the NHS and businesses alike”

Matthew Davis, head of group insurance, Home Retail Group (whose brands include Argos), said: “Managing our business costs is crucial to ensuring that we remain the UK’s leading home and general merchandise retailer... We take our health and safety responsibilities very seriously. But at the same time our compensation culture must be tackled. This is why we support the ABI’s call for reforms to help genuine claimants, deter fraud and reduce unnecessary costs.”

“We're serious about providing a safe environment for our customers and colleagues - but as a retailer with one of the lowest costs to operate in the industry we also need to keep an eye our business costs," added Rob Chester, head of risk and trading law, ASDA.

Argos, ASDA, Ford and Whitbread PLC, who collectively employ over 260,000 people, are among the ‘Consortium for Compensation Reform’. Other supporters are: Alarm, representing risk managers in the public service, the Association of Insurance Risk Managers in Industry and Commerce, BAA, the British Safety Council, the Centre for Justice, the EEF, the Forum of Insurance Lawyers, Lloyd’s Market Association, Lloyd’s and the Society for Motor Manufacturers and Traders.

Responding to the ABI report, Sean McGovern, Lloyd's General Counsel, said: "Insurers are committed to paying valid claims, but steps need to be taken to stop the further growth of a compensation culture in the UK. The costs of a litigious culture aren't just borne by insurers but are a cost to society as a whole. We don't want to see Britain follow the same path as the US, in which excessive litigation costs are excessive and act as a brake on enterprise and economic growth. In particular, referral fees should be banned and the recommendations of the Jackson Review should be implemented in full."

The full report can be found at http://www.abi.org.uk/Publications/57764.pdf

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