New code curbs insurers' contact with accident victims

The practice, known as 'third party capture,' is commonly used in motor claims where the insurer's policyholder is at fault. It can also be used for accidents at work or in 'trip and slip' public liability claims where there is an element of personal injury.

In addition to early settlement, the insurer will frequently offer services directly to the claimant, such as arranging vehicle repair or car hire and medical treatment.

Insurers say third party capture reduces unnecessary legal costs and means claimants receive compensation more quickly than if they instructed a legal representative. Consumer and claimant groups, however, have been calling for the practice to be closely regulated to prevent claimants from being pressurised into accepting lower settlements.

Last December, the Financial Services Authority (FSA) concluded that third party capture did not necessarily cause claimants any detriment but that there was a risk that, in some cases, they would settle without considering all their options.

Its findings were published in a factsheet, which reminded insurers of their obligations to make sure unrepresented claimants were fully informed of their rights – including their right to independent legal advice – and that their interests were properly safeguarded.

The Association of British Insurers (ABI) has now followed this up with a voluntary code of practice on 'third party assistance' and a consumer guide.

Under the code, unsolicited personal visits will be banned. Insurers will only be able to contact unrepresented claimants for the first time by telephone, text, email or letter. Phone calls, however, should always be followed up in writing and texts should be limited to one message asking the claimant to call back. If there is no response, no further texts should be sent.

At each stage of the process, insurers must remind claimants of their right to seek independent legal advice and of the other options for pursuing the claim, such as through the court.

In some circumstances, independent advice should be "strongly recommended": where the claimant is under 18 or has a limited understanding of English; where there is a dispute over who was at fault or whether the accident caused the injury; where more than one medical report is required; or where fraud might be involved.

If the claimant is under 18 and the claim is worth over £1,000, the insurer must insist on the claimant getting independent legal advice.

Where the insurer offers assistance, it must be made clear that there is no obligation to accept any or all of the services offered, and that they are free of charge. Claimants must also be provided with a copy of the ABI's consumer guide or an own-branded version.

If the claimant declines all assistance, this should be acknowledged in writing and the claimant reminded that he has a responsibility to mitigate losses with respect to arranging his own vehicle repair or car hire.

All offers of settlement should be fair and reasonable and based on appropriate evidence and each stage of the process should be properly documented, with all offers of assistance confirmed in writing and settlement agreements properly recorded.

But Muiris Lyons, president of the Association of Personal Injury Lawyers (APIL), said it was difficult for most claimants to judge whether or not a settlement is fair.

"We have sent evidence to the Financial Services Authority to illustrate occasions when insurers have quite clearly attempted to under-settle claims in these circumstances," said Lyons. "We have also heard about quite shameful pressure to settle being brought to bear on vulnerable and injured people.

“The insurance industry is now euphemistically calling this ‘third party assistance’, but what many people won’t realise or remember, often because they are shocked and vulnerable at the time, is that insurers’ primary duty is to their shareholders, not the injured person," he said. "This obviously puts them in direct conflict with the victim.”