Right Idea – Wrong Target

Lord Falconer threatens regulation of compensation sector. See also BBC NEWS | Politics | Firms warned over accident claims

It was in August that Tory spokesman David Davis took a potshot at human rights legislation. He claimed that it was responsible for the ‘compensation culture’ which was growing up in Britain. Lord Falconer is today to weigh into the debate by at – one and the same time – denying that the compensation culture exists, and simulaneously threatening legislation if ‘No-Win, No Fee’ companies don’t voluntarily clean up their act.

Lord Falconer is merely echoing the ‘Better Regulation Task Force’ which in May dismissed the notion of a Compensation Culture as an Urban Myth, while at the same time presenting evidence for it. The story about the school that made pupils wear goggles to play conkers is merely amusing. But the large council that actually spent more than £2m of its £22m roads budget on tackling compensation claims in 2003-4 is proof positive that the compensation culture is no myth. Claims against schools have risen to £200 million a year, enough for 8,000 new teachers, while claims against the NHS rose to £477 million, the equivalent of 22,700 extra nurses. And then, of course, there is the rising cost of insurance premiums.

Both Wrong

Lord Falconer and David Davis are both wrong – but Falconer is on the right track.

Daytime TV – and the less popular satellite channels – are full of advertisements trying to persuade us to take our bosses to court. Then there’s the youngish people who hang around shopping centres with clip-boards asking anybody who will give them the time if they have had an accident in the last three years. None of these ever mention the human rights act, so it’s acutely unlikely that people who sign up with these companies are doing so out of a sudden desire to test out the limits of new legislation. Sorry, Mr Davis.

At the same time, given the amount of evidence, both in terms of companies that make their money by it and the hard facts of claim costs, to say that it is all just an Urban Myth seems a bit far-fetched. After all, if it is, who is paying the advertising costs? I suppose Lord Falconer doesn’t watch daytime TV and so the question has not struck him in that light.


Regulating the claims industry is not the path to take. Falconer is a lawyer, and sees this as a blight on the legal profession. A better approach would be to go back to daytime TV and ask the question ‘Who is being targetted by this kind of advertising?’ It doesn’t take much analysis to work out that the target audience is the same as for high APR car financing and consolidation loans. The message is a simple one: ‘you may not believe that there’s a large pot of money out there waiting for you, but there is and all you have to do is to contact our company’.

The outcome is also the same: people who are financially unsophisticated sign away their rights or future earnings to companies who will make disproportionate profits on the deal.

It is this kind of predatory commerce, which make its money by preying on the hopes and fears of the financially vulnerable, which needs our attention. The combination of hard sell advertising, bullying sales tactics, and an unfair division of either risk or winnings makes these particular companies unwelcome in our economy.

We can regulate on a sector by sector basis forever. In doing so we penalise genuinely beneficial legal and financial services alongside the sharks. It is time for government to turn its attention to the whole unpleasant spread of businesses that trade on false hopes and real miseries. And we should not be regulating these people. We should be eliminating them permanently from our economic life.

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