Queen’s Speech

Viscount Goschen Excerpts

Monday 9th June 2014 Lords Chamber

[Viscount Goschen (Con)]

My Lords, in his opening remarks to today’s session of debate on the gracious Speech, my noble friend Lord Faulks drew attention to the dangers of the so-called compensation culture, which he described as being worrying and as having a chilling effect on volunteering. I therefore very much welcome the series of announcements made by my right honourable friend the Secretary of State for Justice as part of the Government’s campaign to crack down on insurance fraud.

The background to this is the depressing statistic from the Association of British Insurers which showed that the number of dishonest motor claims in 2013 increased by some 34%—a statistic worth dwelling on for a moment—to 59,900. While vehicle-related fraud is of course a major part of this, the tidal wave of claims of varying quality has a major effect on public bodies such as the National Health Service, education authorities and local government, as well as on businesses of many types. The situation we face has to a significant extent been exacerbated or even perhaps caused by the deregulation of conditional fee or so-called no-win no-fee arrangements, so that an industry of aggressive claims management companies has evolved.

In the introduction from the head of claims management regulation to that regulator’s annual report for 2012-13, he said:

“There is something about the nature of the claims industry which breeds, in too many that operate in it, a different kind of business behaviour—one that is less about putting the customer first and best business practice, but more about poor conduct and treating the consumer as little more than a commodity”.

That is a worrying state of affairs and that same regulator recorded some 12,000 complaints. That is a lot of complaints, many of which related to the PPI mis-selling scenario. Is it not a very rich irony that the greatest mis-selling scandal is now being exacerbated by the second greatest mis-selling scandal, namely that of claims management companies trying to engender greater levels of business?

Is it really right that these businesses should be aggressively touting for business by cold calling, texting or e-mailing the general public to encourage them to make a claim—any claim, it seems, and pretty much against anyone? This is backed up by relentless advertising on the television, online and in the print media, which is clearly targeted at those with time on their hands. The proposition seems to be very much, “Would you like to make some free money? Are you prepared to spend some time with us so that we can help you make a case?”. The regulator gives a case study of a claims management company in the north-west which generated many complaints about the “persistent and harassing” nature of its unsolicited calls:

“Consumers complained that they were encouraged to make a personal injury claim even where they had not suffered injury”.

That is an extraordinary state of affairs.

My right honourable friend’s recent announcement indicated certain areas where further action could be taken, namely: requiring courts to throw out compensation applications where claims have been fundamentally dishonest; banning lawyers or claims management companies from offering inducements in the form of cash or electronic goods; and improving the medical assessment of whip-lash injuries. There is much common sense there, but it might surprise some that courts do not already act on the first of those points and that strong medical assessments are not already in place.

My eye was taken by the measure which will ban lawyers from offering inducements in the form of cash and the advertising of that form of behaviour. However, will the Government take their clamp-down on this industry a step further? We now know that this is a £1 billion-pound industry, with many practitioners within it operating on a very dubious ethical basis, as the regulator conceded. I am not a banner by nature but in these particular circumstances, and until the industry can demonstrate its maturity and capability to act in a fair-minded way, I urge the Government to consider extending their suggested measure to ban the advertising of cash inducements into banning advertising overall for this industry.