UK: Who pays for the compensation culture?

Public attitudes to ‘blame and claim’ culture revealed

An overwhelming 96 per cent of people in Britain believe we are more likely to seek damages today than we were a decade ago a new report reveals.

Independent research commissioned by Norwich Union looked at whether the public believe there is a compensation culture and what people really think about claiming compensation.

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%) believe they should claim 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 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%) 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.

One in 10 people put the blame game down to the influence of the US ‘compensation culture’, and a further 5% 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 public 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 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 per cent). On average, people think lawyers get 33 per cent of payouts but the figure is closer to Ł40 out of every Ł100 claimed

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 are ‘fair game’. Hooker said: "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 Ł10 billion in compensation claims is paid out according to the Institute of Actuaries (December 2002) – this costs Ł500 per household. Bogus or excessive claims cost local authorities as much as Ł117 million a year, according to the Commission for Architecture and the Built Environment.

There has been a 48% increase in the number of claims being handled by the NHSLA (National Health Service Litigation Authority). As 31st March 2003 there were 19,580 live claims against trusts. There is inevitably also a corresponding increase in the estimated value of claims against trusts, which in the year to 31st March 2003 rose 12%.

Mr Hooker said; "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."

Download the report in Adobe PDF

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Media contact:
Matt Buchanan, Charlotte Speedy or Charlotte Rudddlesdin at QBO Bell Pottinger on 020 7861 2424. David Ross at Norwich Union 07786 526350.

Editor’s Notes:
About the research

• Norwich Union commissioned edgar galek Ltd to carry out phone interviews with 1,000 UK adults in January 2004. The survey supported an extensive qualitative research project by Norwich Union in conjunction with edgar galek into attitudes towards compensation-seeking in the UK which took place in the last half of 2003.

About compensation costs in the UK

• The estimated cost to the NHS in compensation in 2001 was Ł900m, to LEAs Ł200m, and to the Police /MoD Ł800m (Source: Actuarial Report – The Cost of Compensation)
• According to the NHSLA report and accounts 2003 there has been a 48% increase in the number of claims being handled. As 31st March 2003 there were 19,580 live claims against trusts. The estimated value of claims rose 12% in the year up to 31 March 2003.

Norwich Union

• Norwich Union is the UK's largest insurer with a market share of around 14 per cent. With a focus on insurance for individuals and 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 images are available on the Aviva internet press centre at www.aviva.com/media
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