Report highlights PI claims environment

The Institute and Faculty of Actuaries’ (IFoA) sixth annual report has revealed a direct correlation between the location of personal injury claims management companies (CMCs) and areas with highest personal injury claims.

Looking at third party injury (TPI) and third party damage (TPD) motor insurance claims shows there remains a strong correlation between the location of claims management companies (CMCs) and the frequency of third party injury claims. The top six cities in the UK for TPI claims all come from one area – the north-west.

The IFoA report collated and analysed data from 18 of the top 20 motor insurers for 2014. The report focussed on third party claims which make up 70% of all motor insurance claim costs.

The research found the top six UK cities for personal injury claims from road accidents versus third party property damage claims are from the north west of England, with Liverpool, Oldham and Manchester making up the top three. The North West also has the highest number of CMCs.

The UK cities with the lowest incidence of third party injury claims were all from Scotland, which also has the lowest number of CMCs – Aberdeen, Inverness and Perth topped the table.

The report also found that reductions to third party injury claims cost have stopped completely, with a return of inflation in the second half of 2014. This is in contrast to the significant fall (-20%) in 2013 immediately after LASPO legislation was introduced which reduced the number and average cost of TPI claims.

Although the average number of claimants per claim fell by almost three per cent for small TPI claims, average claims cost rose in 2014 by 1.4% after having fallen in 2013 by 5.8% after the legal reforms.

In the year to June 2015 the number of CMCs covering personal injury claims decreased by 16% to 934, which appears to be driven by consolidation in the industry. The same period did however see a 30% increase in their turnover, potentially associated with increased activity around accident management services. This could adversely impact future inflation in the average cost of TPD claims.

David Brown, one of the authors of the IFoA report said, ‘The IFoA report finds that the reforms the government has put in place to tackle the costs of third party motor claims driven by claims management companies had measurable impact. The government reforms reduced both the number and cost of third party personal injury claims. However, now that the reforms are bedded in, costs are on the rise again.

‘We also see that claims management activity in the market is increasing, and not just focusing on third party personal injury claims. Third party property damage, such as damage caused to the other driver’s car, seems to be the new target.’