Motor car insurance premiums £40 higher due to lawyer fees

Motor car insurance premiums are £40 higher every year thanks to the lawyers fees from road accident legal costs, according to the Association of British Insurers.

The ABI’s recently conducted analysis of how much the UK legal system impacts the costs of car insurance rates was conducted by examining in excess of 50,000 low-value personal injury road accident claims.

The research revealed that during the settlement of an average road accident claim, which tallied up at £2,430, also generates legal fees of approximately £2,100..  This means that on insurance claims under the total of £5,000, an additional 87 pence is generated in legal fees for every £1 paid out in compensation.

Approximately 10 per cent of every car insurance quote in the UK is actually being paid directly to the legal sector, the ABI estimates, as consumers pay approximately £2.7 million every day through their insurance cover.

Nick Starling, general insurance and health director for the Association, stated that any system that delivers £2,000 worth of compensation whilst generating £5,000 in costs is clearly not functioning properly.

Mr Starling added that the excessive nature of civil litigation system’s legal costs is evidence of its decidedly broken nature.  Additionally he said that as a handful of claims management firms seem to excel in generating high legal fees is an added cost pressure that only ends up being passed along to motorists.

Meanwhile Ken Clarke, Justice Secretary, made indications that English and Welsh lawyers may be subject to new regulations.  These new rules may prevent those lawyers from increasing their fees in personal injury claims that are handled on a no-win-no-fee basis.

Currently, any lawyer that works on such a basis has the ability to multiply their fees by a factor of two if they win their case.

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