As insurers continue to blame the increase in motor premiums on the man on the street having the bare faced cheek to claim for being injured in an accident, they may wish to be a bit more honest about their own actions. Insurers, it seems, regularly squeeze extra cash out of personal injury claims to boost their own profits, or are quite happy to indulge in short sighted unethical behaviour.

As recently reported in the legal press, the Royal & Sun Alliance (RSA) sent a client’s car off to be repaired by its own repair company after an accident. The accident was then ‘administered’ by another subsidiary of RSA which produced an invoice. RSA sought to recover the cost of repairs from the insurer of the other driver – Equity Red Star. All sounding pretty normal so far...

However, Equity Red Star smelt a rat and, after a lot of wrangling, the court discovered that the subsidiary company in the middle was taking the invoice from the repair company, increasing the hourly rate, and then producing a fresh invoice to pass to the other insurer for payment.

The court was rightly outraged that RSA was inflating the cost of repairs to boost its own profits, and hiding this fact by using an intermediary company. The judge was not a happy man. Fraud, it seems, is not solely a claimant issue.

Referral fees have become something of a pariah, with every man and his dog calling for a ban. The main beneficiaries of referral fees are undoubtedly the insurers, who charge solicitors an inflated fee for the pleasure of handling their cases. Last year, referral fees accounted for six per cent of Admiral’s profits. Bizarrely, despite taking fees from both defendant and claimant lawyers, insurers criticise claimant solicitors for being able to afford to pay them.

It’s worth reflecting on whether a ban on referral fees actually works. It’s great to announce a ban but in reality will anything change? When is a referral fee not a referral fee? Will it just be called something else? Members in Northern Ireland have told me that there the ban has been toothless. It is not enforced, and anecdotal evidence suggests that the referral market remains in all but name. In effect, the practices have been driven underground.

So, if you had an agenda to reduce the number of claims what would you do? Clearly, no insurer is pursuing a prevention agenda here. Instead, they seek to stigmatise claimants through the media - eg, the reported suggested that 50% of all whiplash is fraudulent - specifically to put the genuine claimant off. False information abounds about whiplash – we are dubbed the ‘whiplash capital of Europe’ despite there being more claims in Italy and Germany. Our average compensation for whiplash is also one of the lowest figures in Europe at 2,878 euros. In Switzerland, compensation is on average 35,000 euros. Bigger hills clearly lead to bigger whiplash.

And, more and more, where an injured person does wish to pursue a claim, the insurers are quick to pay him off. A growing practice involves insurers ringing people straight after an accident and offering money not to pursue a claim. This is not a token amount – sums in the region of £500 - £1000 are offered to people who would otherwise have no intention of claiming. Offers of compensation are now made before a medical report has been issued in 25per cent of cases. Insurers don’t even want a doctor to look at an individual and check if the injuries are genuine. The offers are low, but without medical evidence it is impossible for the lawyer to advise the client as to whether it is appropriate or not. Lawyers are not doctors.

Such behaviour - paying people not to see a lawyer, or then buying them off as soon as they do - takes all the checks and balances out of the system which will only fuel fraud and drive premiums up further. It may be a commercial approach, but it’s short sighted, unethical and it will undoubtedly backfire. Poor decision making costs, and it’s motorists’ premiums that will pay.