Car insurer Admiral blames profit downturn on personal injury claims
Admiral, one of the UK’s largest car insurers, has said this month that its pre-tax profits for the year will be lower than previously expected, predicted by analysts to be a paltry £290m rather than the expected £320m. As the insurer’s shares took a dive, the company took the now familiar angle of blaming personal injury claims for its woes.
In a statement, Admiral said that “higher-than-historical levels of personal injury claims during 2011,” had led to the downsizing of its expected profits for the year.
Admiral – A love-hate relationship with injury compensation claims
Admiral’s stance on personal injury claims is however a little confusing. In September, the government announced it would be putting in place a ban on insurer’s receiving ‘referral fees’ from personal injury lawyers in return for passing on the details of customers who had been involved in non-fault accidents. In response to this Admiral said that it, “welcomes any action taken to curb the compensation culture that currently exists in the UK motor insurance market.”
However, earlier in the year the insurer confirmed that it was itself making a profit through these referral fees, comprising “6% of UK car insurance profit before tax”. In a disclosure made in the firm’s interim results for 2011, it said: “If one of our policy holders has a non-fault accident, suffers a bodily injury and they require assistance, we will put them in touch with a personal injury lawyer.”
In fact the drop in projected profits could just as easily be attributed to the company’s loss of revenue from referral fees as it could from any rise in personal injury compensation claims themselves. When the government announced its crackdown on referral fees in September, Admiral’s shares reportedly plunged by 7% in response.
Biting the hand that feeds
Admiral and other car insurance firms appear to want to have their cake and eat it with regards to personal injury claims. On the one hand they have sought to profit by passing on the details of their customers to personal injury solicitors. On the other, they attack what they call a ‘compensation culture’ and use it to explain away losses in profit, and to justify hikes in insurance premiums.
While it is undeniable that there are some fraudulent claims, and even organised ‘cash for crash’ scams, the vast majority of people making an head injury or general injury compensation claim have had their lives seriously impacted, and in some cases devastated, by accidents for which they are blameless. Surely it is these people who are deserving of sympathy, long before the shareholders of major insurance companies.