PI claims continue to increase premiums
The Telegraph reports that Allianz says the industry will pass on the cost of claims inflation to motorists
The cost of car insurance is set to rise as providers struggle with a stubbornly high number of personal injury claims that now represent half of their overall claims costs, according to a major insurer.
Despite a series of new rules designed to discourage spurious injury claims after a car accident, and an overall drop in crashes on Britain’s roads, the number of injury claims has risen 50% since 2007.
Allianz estimates that for every £100 a UK insurer takes in car premiums, £30 goes on advertising and other costs. The remaining £70 is used to pay claims, half of which goes to personal injury claimants. In the German market, it estimates that just four per cent of claims costs are the result of personal injury such as whiplash.
According to the Government’s Compensation Recovery Unit, personal injury claims rose by about 50% to 773,000 a year between 2007 and 2014, at a time when accidents reported to the police fell 23% and overall traffic rose slightly.
The Government has already tried to minimise spurious claims. The Information Commissioner unveiled a clampdown on cold-call companies earlier this year, and since April all medical experts who provide assessments of whiplash injuries have been required to register with the Ministry of Justice.
From this month, solicitors have also been signing up to a new data-sharing site with insurers in a bid to tackle fraudulent claims.
Nevertheless, Allianz has drawn attention to the ‘hard-sell techniques’ used by some law firms to drum up new claims.
‘There’s no doubt that hard-sell techniques are used,’ said Graham Gibson, director of claims at Allianz UK. ‘If insurers used any of the techniques the lawyers used, the hard sell, the FCA would have our guts for garters. It makes double glazing sales look like child’s play.
‘There’s a belief that pursuing a claim is free, but actually it comes back to the cost of premiums in the end.’
Car insurance customers will start to face higher premiums this year, after several years of falling prices in the wake of price comparison sites and a Competition Commission review, according to industry estimates.
Recent figures from the accountancy firm Deloitte found that car insurance customers paid £13bn in premiums last year, a fall of £400m. At this level, insurance firms were paying out £101 in claims and other costs for every £100 they took in.
The research predicts that the insurers’ costs on car insurance will worsen to 103% this year and 105% next year, forcing companies to either slash costs or raise prices.