The Association of British Insurers says spiralling legal bills for injury claims are increasing motor insurance premiums.
The legal costs of settling personal injury claims following motor accidents is adding £2.4 million a day to motor insurance premiums, says the Association of British Insurers (ABI). That equates to an extra £30 a year on the average annual comprehensive motor insurance policy.
And legal bills frequently exceed the amount of compensation paid out to accident victims.
The ABI estimates that legal fees add an equivalent of £1,666 to motor insurance premiums every minute. Between 2004 and 2011, it says there has been a 130% increase in claimant’s legal costs.
One insurer’s average claimant legal costs in 2010 were 142% of the value of the compensation received by victims.
The ABI also cites the example of a work-related injury settled out of court for £12,750 which had legal costs of £74,000.
And a legal bill of £37,250 was submitted for settling a claim for £15,000 compensation for a woman who fell into the moat of a castle.
The Government is extending the claims limit for fast-track personal injury motor claims from £10,000 to £25,000, partly to lower legal costs. It has also pledged to reduce the fixed fee - currently £1,200 - that lawyers can earn from small-value personal injury claims.
The Prime Minister has also vowed to tackle the number of whiplash claims, which accounts for 70% of motor insurance injury claims. It is already pushing for a ban on referral fees, where people or companies sell on insurance claimants’ details following an accident.
The Office of Fair Trading is due to publish a report on the motor insurance industry in the spring.
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