New Code Limits Contact with Accident Victims

by Katy Murcutt - Paralegal

05 July 2010, filed under Motoring

A new voluntary code of practice for insurers will prevent insurance companies making unsolicited visits to accident victims. Under the new code, the insurers would still be allowed to cold call victims to negotiate an early settlement of a pending claim.

The practice of visiting unannounced is often used in motor accident claims where the insurer’s policy holder is liable. This is known as third party capture, and can be applied to work accidents, as well as road traffic accidents.

Insurer’s argue that third party capture is essential to curb growing legal costs and to compensate victims faster. However, consumer complaints groups have long called for regulations to be imposed upon insurers as victims are being pressured into accepting low legal amounts and are not being given enough opportunity to seek expert legal advice.

Last year the Financial Services Authority (FSA) found that insurer’s use of third party capture did not generally cause victims any detriment, however it was concluded that claimants may settle their claims quickly and not consider all their options beforehand.

The FSA published their findings in the form of a fact sheet to ensure victims making a claim without legal representation were aware of their rights. The fact sheet also included a prompt to remind insurers of their responsibilities in relation to claimants who do not have or cannot afford legal representation.

In response to the FSAs publication, the Association of British Insurers (ABI) has released a voluntary code of practice for insurers and another for consumers.

Although the new code is voluntary, it bans insurers signed up to it from visiting claimants unannounced. Insurers will be able to contact claimants who have no legal representation via telephone, letter, email or similar. However, there has also been some guidance issued by the ABI in respect of communication between the parties, stating that all communication should be followed up with a written confirmation of what was discussed.

Further to this, under the code, insurers will be compelled to remind claimants of their right to obtain legal advice at every stage of the process. Also, where the claimant is under the age of 18 years old or has a limited understanding of the English language and there is a dispute, legal advice must be strongly recommended by the insurance companies.

If the claimant is under 18 years of age and the claim is worth more than £1,000, the insurer shall be duty bound to insist that the claimant must obtain independent legal representation prior to pursuing the claim. Should the insurer offer to assist the claimant, the insurer must make sure that the claimant fully understands that they are under no obligation to accept any of the services offered and that the services offered are free. Further to this, the claimant shall receive a copy of the ABIs guide for consumers, or an insurer’s branded version of the same.

Should the claimant resist assistance, this ought to be recorded in writing alongside an acknowledgement by the claimant that it is their own responsibility to mitigate all losses with regard to vehicle repair or car hire etc.

All offers made by the insurer to the claimant to settle the claim must be reasonable and proportionate to the damage suffered based on relevant evidence. Each stage should be confirmed in writing so that settlement and prior negotiation can be accurately recorded.

Please see our motoring templates for further information on motoring matters.