With car insurance rates increasing by 40 per cent over the past 12 months, many car insurance companies have been facing accusations of profiteering at a time when UK households are struggling to make ends meet.
However, consumers may be surprised to learn that the motor car insurance industry has been operating at a loss for several years due to rising car insurance claims costs. This isn’t due to an increased number of accidents in the UK, as the Department for Transport says that, over the last three years, the accident rate actually decreased by 10 per cent, but in the number of people claiming to have suffered injury in these accidents increasing by 43 per cent.
While a significant percentage of accidents do result in serious injury, smaller injuries are the class of incidents that underwent the most substantial increase. Whiplash claims in particular have rocketed, resulting in a daily average of 1,200 new claims being filed.
Even more suspect is the £8 million the NHS spends treating actual whiplash cases, yet insurance companies have been paying out an eye-watering £2 billion in damages on whiplash claims. This has led many industry experts to say that the UK has fallen into a so-called ‘compensation culture,’ with blame placed soundly at the feet of a legal system that takes its cues from the United States.
Insurance companies need to pay out on valid claims in a prompt and fair manner. However, from dealing with the increase in fraudulent or frivolous claims, the costs incurred get passed down to honest policyholders in the form of increased premium payments.
Many industry experts have come forward with strategies in rectifying the situation by dismantling the conditional fee arrangement system that personal injury cases are tried under and by banning the practice of referral fees, which are payments made to insurers by claims management companies and law firms for the personal details of policyholders that have filed accident claims.