Who pays for the compensation culture?

Article date: 19 May 2004

Public attitudes to ‘blame and claim’ culturerevealed

An overwhelming 96 per cent of people in Britain believe we aremore likely to seek damages today than we were a decade ago a newreport reveals.

Independent research commissioned by Norwich Union looked atwhether the public believe there is a compensation culture and whatpeople really think about claiming compensation.

While three-quarters of Brits are worried about the impact of anincreasing ‘blame and claim' culture, nearly half say theyare themselves more likely to claim compensation.

In fact more than one in five people (21%) believe they shouldclaim for compensation whenever they can.

The report is the first in-depth look at whether and why the‘blame and claim’ culture has taken hold in the pastten years. One of the key factors is that the British sense ofcollective responsibility has given way to an individualisticapproach to life where, as one respondent said ‘you are whatyou have’.

According to David Hooker, director of claims at Norwich Union,the research clearly points to a cultural shift: "The researchreveals a disparity in what people think about the compensationsystem, and how they act. Whilst it is excellent that over theyears we have increased access to justice we have to exercise thoserights with responsibility, acknowledging the consequences of ouractions.

"What’s more worrying is that successively youngergenerations express less concern about the impact of a ‘blameand claim’ culture, and this shift, if left unchecked, couldmean 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. Nearlya quarter (23%) of people think the No Win No Fee adverts on TV areraising people’s expectations of what they’re entitledto. In fact, a third of people think such advertising should bebanned.

One in 10 people put the blame game down to the influence of theUS ‘compensation culture’, and a further 5% put it downto a media-led perception that getting big payouts is both normaland easy and has provided people with guidelines to act.

On making the compensation system fairer and more efficient thepublic say:

  • 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 percent)
  • Compensation lawyers should get half of what they currently doand receive a fixed fee, rather than a percentage of costs awarded(66 per cent). On average, people think lawyers get 33 per cent ofpayouts but the figure is closer to £40 out of every £100claimed

The increasing number of attempts to claim is built on theperception that seeking damages is risk free, and institutions likepublic authorities or the NHS are ‘fair game’. Hookersaid: "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 andinsurance premiums. "

Every year £10 billion in compensation claims is paid outaccording to the Institute of Actuaries (December 2002) –this costs £500 per household. Bogus or excessive claims cost localauthorities as much as £117 million a year, according to theCommission for Architecture and the Built Environment.

There has been a 48% increase in the number of claims beinghandled by the NHSLA (National Health Service LitigationAuthority). As 31st March 2003 there were 19,580 live claimsagainst trusts. There is inevitably also a corresponding increasein the estimated value of claims against trusts, which in the yearto 31st March 2003 rose 12%.

Mr Hooker said; "This issue needs urgent engagement fromgovernment, individuals and business. We need to exercise ourrights in a more socially responsible way so that those that areentitled to compensation receive it swiftly and at a fair level. Ifwe don’t do something now, the public will have to foot anever increasing bill, and our public services will sufferirrevocable harm."

Download the report in AdobePDF


Media contact:
Matt Buchanan, Charlotte Speedy or Charlotte Rudddlesdin at QBOBell Pottinger on 020 7861 2424. David Ross at Norwich Union 07786526350.

Editor’s Notes:
About the research

  • Norwich Union commissioned edgar galek Ltd to carry out phoneinterviews with 1,000 UK adults in January 2004. The surveysupported an extensive qualitative research project by NorwichUnion in conjunction with edgar galek into attitudes towardscompensation-seeking in the UK which took place in the last halfof 2003.

About compensation costs in the UK

  • The estimated cost to the NHS in compensation in 2001 was£900m, to LEAs £200m, and to the Police /MoD £800m (Source:Actuarial Report – The Cost of Compensation)
  • According to the NHSLA report and accounts 2003 there has beena 48% increase in the number of claims being handled. As 31stMarch 2003 there were 19,580 live claims against trusts. Theestimated value of claims rose 12% in the year up to 31 March2003.

Norwich Union

  • Norwich Union is the UK's largest insurer with a market shareof around 14 per cent. With a focus on insurance for individualsand small businesses, Norwich Union insures:
    - one in five households
    - one in seven motor vehicles
    - more than 800,000 businesses
  • Norwich Union’s news releases and a selection of imagesare available on the Aviva internet press centre at www.aviva.com/media
  • An ISDN facility is available for studio quality broadcast -call the press office on 01603 683820

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