Some firms encourage 'frivolous' injury compensation claims

The aim is to clamp down on so-called "ambulance-chasing" firms and stop organisations being so afraid of being sued for damages that they stop putting on events and organising activities.

But what is the scale of the problem and how are they affecting our attitudes to taking risks?

One problem is the spiralling cost of personal injury cases to insurers, which in turn pushes up premiums and jeopardises public events because organisers cannot afford to pay them.

The Association of British Insurers says public liability and employer liability claims cost the industry �3.4bn in 2003, up from �3bn in 2002 and �2.3bn in 2001.

Spokesman Malcolm Tarling said people were more likely to take legal action if they had been injured nowadays.

Higher premiums

And though many claims were unsuccessful, the courts seemed to be giving higher awards in cases that were successful.

He said: "We are pleased with Lord Falconer's move, because it shows the government is taking the issue seriously.

"We are not against people receiving compensation but the rising costs of claims have to be paid for. The money does not simply appear out of thin air.

"Premiums have risen, in some cases significantly. There are all sorts of examples, such as schools which have had to cancel or curtail traditional events.

Justifiable claims

"Everything from injuries at work to donkey rides on Blackpool beach have been affected because the organisations cannot afford to pay the insurance."

Mr Tarling stressed there had to be a balance between the rights of people with genuine and justifiable claims to compensation and the need to keep down insurance premiums.

The firms targeted by the Lord Chancellor are those who tout for business by giving the impression there is easy money to be made by putting in a compensation claim.

They usually act as go-betweens, passing would-be claimants details on to lawyers to deal with rather than dealing with the legal aspects themselves.

'Distasteful'

Many offer to fight cases on a "no win no fee" basis - a claim that may mask hidden costs, according to personal injury lawyer Andrew Twangley.

These could include insurance policies sold at "exorbitant" rates of as much as �1,000 instead of the �15 to �30 they should cost.

Mr Twangley is the founder of Injury Lawyers 4U, a consortium of specialist claims lawyers who deal directly with clients, rather than buying case details from the claims management firms.

They are encouraging people not only to have accidents on purpose but also to make up accidents Andrew Twangley

He too welcomed the government's efforts to regulate claims management firms, which he said did little to enhance the claims process for either the claimants or lawyers.

Solicitors who took on claims referred to them by such companies often found they had been misled about the strength of the case, leaving them out of pocket and "in a very embarrassing position", he added.

He agreed the number of people making "frivolous" compensation claims had risen, encouraged by firms who "persuade people that everything can be claimed for and then rip off people who have suffered a genuine loss".

And he said some firms would use "any means possible" to persuade clients to make a claim.

"Some of them advertise in hospitals, with signs saying, 'Has the nurse made you worse?'" which is incredibly distasteful and not something our members would ever do.

"They are encouraging people not only to have accidents on purpose but also to make up accidents."

Horseplay

"The compensation culture is a fallacy, as the figures demonstrate, but when you get companies cold calling you to dream up a claim you might want to make, it's easy to see how the myth is sustained."

He said common sense was needed to stop organisations such as schools being so afraid of being sued that they would not organise activities such as sports days or adventure holidays.

In some ways, he said the increased awareness of risk by such organisations was a good thing, as it meant they were more likely to take the necessary steps to avoid accidents.

It's about time there was some sort of regulation of these companies. The sooner the better, as far as we're concerned John Cosgrove

But said: "In cases when kids maybe hurt themselves while engaging in horseplay, as they always have done, then there should not be a claim for compensation.

"But if a school has been negligent, such as taking a group canoeing with only one teacher supervising, who was eating their sandwiches at the time the accident occurred, then there should be."

Mr Twangley believes the most unscrupulous firms would find it hard to survive if the reforms proposed by the government go through.

He said: "They will fall out of the market because they won't be able to comply."

Not all claims management firms oppose the government's proposals.

John Cosgrove, operations manager of south west London-based Claim Simplicity, said his firm was in favour of regulating the industry.

He said: "It's about time there was some sort of regulation of these companies. The sooner the better, as far as we're concerned.

"We think of ourselves as an ethical company and are not ambulance chasers, though there are plenty of companies like that.

"But there are less like that than there used to be because their business models have been challenged in the courts and have failed to stand up so some of them have collapsed."

"We don't charge our clients huge insurance premiums, for example, which many of them do and we do not advertise in doctors' surgeries."