Whiplash comeback sees insurance costs increase

Drivers are expected to face a 15 per cent rise in car insurance costs this year due to the recent rise in fraudulent whiplash claims.

Insurance executives believe unscrupulous claims management firms, lawyers and doctors have discovered loopholes in new laws that were designed to end the scandal.

Industry insiders are claiming that criminal outfits had returned to cold-calling susceptible members of the public and convincing them to fake injuries in front of doctors.

New data obtained by The Telegraph suggest 7,500 more whiplash claims than last year are being submitted each month – yet the number of road accidents has remained almost unchanged.

Yesterday, we also reported how one of Britain’s biggest car insurers, Esure, said its profits had fallen by a fifth as a result of the surge in false PI claims.

David Williams, managing director of Axa said, ‘We are seeing bigger and more fraudulent claims as companies find ways round the rules.’ He continued, ‘It’s as bad, if not worse, than before.’

Annual car insurance premiums are now rising for the first time in three years as insurers struggle to cope with the return of whiplash fraudsters, according to the AA.

The ‘10 to 15 per cent’ increase it predicts for the year would add around £80 to the cost of a new annual car insurance policy, which now averages around £550.

Premiums had hit £715 a year before they began to fall steadily when the Government introduced measures to tackle the Britain’s ‘compensation culture’ in 2013. Since then there has been a ban on ‘referral fees’ paid between lawyers, insurers, claims firms for potential clients; medical professionals have been blocked from charging more than £180 for preparing whiplash injury reports; lawyers have had charges capped at £500 for preparing a basic claim; and all claims must now be verified by a randomly-selected medical expert before they are looked at by the insurance company.

Following the reforms the annual cost to insurers of processing personal injury claims and issuing payouts fell by a third.

But the experts now believe disreputable claims firms were merely pausing to work out how to circumvent the restrictions.

Data collected by the Ministry of Justice showed that the total personal injury claims dropped below 60,000 per month, in June 2013 after the new rules were introduced.

However that number currently sits at 73,500 a month on average, an increase of 66,000 last year.

Claims firms and lawyers are believed to be bypassing the ban on referral fees by asking clients to call carefully-selected partner firms, rather than passing names and telephone numbers between themselves. Payment for this indirect referral is then made through an alternative, seemingly legal, route.

Some companies are thought to be submitting multiple claims for each whiplash case to increase the chances of their client being allocated a doctor with which the company has a relationship.