U.K. Survey Finds Compensation Culture Concerns

May 19, 2004

A recent survey commissioned by Norwich Union, a division of the Aviva group, and the U.K.’s largest b general insurer, has concluded that the “compensation culture,” i.e. the unbridled tendency to file a lawsuit whenever possible, has become a fact of life for U.K. insurers, and is no longer confined to the U.S.

The report reveals that “an overwhelming 96 per cent of people in Britain believe we are more likely to seek damages today than we were a decade ago,” said the announcement. “While three-quarters of Brits are worried about the impact of an increasing ‘blame and claim’ culture, nearly half say they are themselves more likely to claim compensation. In fact more than one in five people (21 percent) believe they should claim for compensation whenever they can.”

Norwich said “the report is the first in-depth look at whether and why the ‘blame and claim’ culture has taken hold in the past ten years. One of the key factors is that the British sense of collective responsibility has given way to an individualistic approach to life where, as one respondent said ‘you are what you have’.”

According to David Hooker, director of claims at Norwich Union, the research clearly points to a cultural shift: “The research reveals a disparity in what people think about the compensation system, and how they act. Whilst it is excellent that over the years we have increased access to justice we have to exercise those rights with responsibility, acknowledging the consequences of our actions.

“What’s more worrying is that successively younger generations express less concern about the impact of a ‘blame and claim’ culture, and this shift, if left unchecked, could mean the nation’s compensation bill continuing to rise.

The report indicates that the public is putting the compensation ‘industry’ in the frame for stimulating demand. Nearly a quarter (23 percent) of people think the No Win No Fee adverts on TV are raising people’s expectations of what they’re entitled to. In fact, a third of people think such advertising should be banned.”

According to the survey, one in 10 people put the blame game down to the influence of the U.S. ‘compensation culture’, and a further 5 percent put it down to a media-led perception that getting big payouts is both normal and easy and has provided people with guidelines to act.

On making the compensation system fairer and more efficient the study found that a number of people would favor the following measures:
– Prosecute people who make false claims (38 per cent)
– Ban daytime TV’s ‘No Win, No Fee’ adverts (31 per cent)
– Government should put a limit on claim entitlements (21 per cent)
– Compensation lawyers should get half of what they currently do
and receive a fixed fee, rather than a percentage of costs awarded (66 percent). On average, people think lawyers get 33 per cent of payouts, but the figure is closer to £40 [$71.20] out of every £100 [$178] claimed.

Commenting further on the results of the survey, Hooker observed that “the increasing number of attempts to claim is built on the perception that seeking damages is risk free, and institutions like public authorities or the NHS [National Health Service] are ‘fair game’. There is a perception that these costs are in some way ‘absorbed’. However, irresponsible insurance claims are anti social, waste time and resources, delay genuine claims and increase tax and insurance premiums.”

Every year £10 billion [$17.8 billion] in compensation claims is paid out according to the Institute of Actuaries (December 2002). This ends up costing the average household £500 [$890] per year. Bogus or excessive claims cost local authorities as much as £117 million [$208 million] a year, according to the Commission for Architecture and the Built Environment.

“This issue needs urgent engagement from government, individuals and business. We need to exercise our rights in a more socially responsible way so that those that are entitled to compensation receive it swiftly and at a fair level. If we don’t do something now, the public will have to foot an ever increasing bill, and our public services will suffer irrevocable harm,” Hooker concluded.

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