Where did the culture of compensation come from?

When Axa came out and sang from the roof tops about its decision to ban referral fees, it labelled the move "a first step in a journey to reform the emerging compensation culture which it claimed was spiralling out of control".

 Since then, much has been written about the insurer's decision to go it alone and consequent doubt has been raised from certain quarters over how noble Axa's intentions really are. Other insurers have not jumped on the band wagon, not because they do not perceive referral fees to be a problem, but because they feel that only an industry wide solution can provide the necessary clout to tackle the culture of compensation.

Regardless of who is right or wrong, the industry is unanimous in its desperate call for change. However I am surprised by how little has been done to document just how we have managed to get to this point. A lot of people have waxed lyrical about the emergence of a compensation culture, growing like a septic abscess, but little has been done to examine how it became so infected in the first place.

Perverse incentive
Justice Minister Jonathan Djanogly MP's claim that referral fees for personal injury litigation have provided a "perverse incentive" for the public to make frivolous claims has been widely reported. In fact there seems to be an accepted belief that compensation culture is an entity that has evolved, a modern epidemic born out of growing greed, a dependence upon the state and an increasingly sophisticated legal system.

It must have come from somewhere though, right?

When Aviva unveiled its research into claims from 1860-1900 it was astonishing to see how many claims ranged from outlandish to plain absurd. The findings made it quite clear that it is not just modern society that has tried (often successfully) to pull a fast one on insurers. Thought slips and trips were a new fad? Well the archivist conducting the project was surprised by how many claims for slipping on orange peel there were within the records. I know scurvy was more prevalent in those days but I can't honestly believe this accident would have been such a common occurrence.

Blind man's buff
There was also a vicar claiming compensation for a dangerous bout of leap frog and a grocer raking it in after a game of blind man's buff took a turn for the worst. A Welshman even won compensation for stubbing his toe on a chair after failing to connect with his intended target: his poor pet pooch.

So yes compensation culture and the impact it is having on premiums has undeniably got worse but this research could be evidence that a certain public attitude towards insurance may have always existed and up until now I would not have necessarily thought that was the case. Has dissatisfaction always led to blame? The desire to offload responsibility in order to receive remuneration may not be a learned response and actually exist deep within the human psyche.

Sense of entitlement
While it is hard to judge whether society has created this sense of entitlement within the general public, it is clear that it has facilitated its growth. If we are predisposed to want to take advantage of the insurance industry then it is going to make it even harder to force change. Can the industry really change the culture of compensation or is it akin to changing how we naturally think and react to situations?

Perhaps we are going to have to be satisfied with creating rules that make it more difficult to indulge this part of ourselves. However if we focus on making it harder to claim rather than asking why people may have always frivolously and falsely done so, opinions such as this one posted on a national daily's website (guess which one!) will only get worse: "There's only one winner in the insurance game. I think this industry is one of the most despicable aspects of this corporatised (hmm- word??) husk of a country.

Silent half of same menace
"People are starting to see that the faceless corporations trading human values for profit are the cause of great misery in this country. Banks have taken most of the flak but the insurers are the silent half of the same menace."

The answer may not be a new one, it could even illicit a groan, but the only way things can really change is if the public can be forced/encouraged to value insurance more.