Roadside recovery group and insurer AA recently commented that comprehensive motor car insurance rose by 33.2 per cent throughout last year. The average cost to the UK consumer stood at £843, which represented the largest rate hike since the AA began its market monitoring practices seventeen years ago.
The sharp increase highlights how car insurance groups attempted to cope with the heightened personal injury claim payout rate. Many insurers claim that lawyers who encourage consumers to engage them under a “no win no fee” scheme is the reason discount car insurance is becoming increasingly hard to find in the UK.
AA Insurance director Simon Douglas stated that a marked increase in the number of personal injury and accident management claims has led to the development of a so-called ‘compensation culture’ in the UK. Mr Douglas stated that overzealous lawyers have been encouraging people to make claims even if they may not have actually suffered any injuries.
Insurers began to raise their rates in the latter part of 2009. However due to intense competition in the car insurance market, prices had been frozen or cut for nearly a decade prior.
Insurance industry experts and insiders have commented that the price increases may allow it to begin to recoup its recent losses. Industry leaders such as Aviva, Admiral, RSA, and Royal Bank of Scotland have all indicated that for each of the last 15 years, they have been paying out more in claims than they had been receiving in premiums.
As the largest of these firms, RBS reported a £253 million operating loss in the first half of last year.