Cost of motor claims hits highest ever level

Car crash

The cost of motor claims has climbed to the highest level on record, the ABI said. However, defendant solicitors say the numbers don't paint the whole picture.

The average claim cost rose to £2936 in 2017. Despite this, the total amount paid on all motor claims stayed roughly the same at £8.1bn.

Rob Cummings, ABI’s assistant director, head of motor and liability, said: “Despite motor insurance remaining a highly competitive market, cost pressures saw the average price paid for motor insurance jump by 9% to a record high in 2017.

“Putting a lid on excessive costs, which end up being paid for by motorists, remains a priority for insurers. This makes it all the more important for the government to play its part, by pushing ahead with its reforms to personal injury compensation without further delay.”

The average personal injury claim in Q4 2017, at £10,816, was the highest quarterly figure since Q2 2016. The number of personal injury claims in 2017 fell slightly on 2016, with 320,000 claims settled.

The ABI said that despite a reduction in road casualties, whiplash-style claims reported to the Compensation Recovery Unit have been rising.

Net Cost

Tom Jones, head of policy at Thompsons Solicitors claimed however that the net cost of car insurance claims incurred had decreased in 2016 for the sixth year in a row, down 42% since 2010.

“This means they have saved billions every year,” he told Post. “Yet their members say there is a ‘crisis’ and, without an apparent shred of irony, that the ‘answer’ is to take away the rights of those injured through no fault of their own to have free access to legal advice.

The ABI presumably don’t want to embarrass their members by mentioning recent record profits. Describing motor insurance as ‘a highly competitive market’ when it is a compulsory product and the ABI admit that the average price of motor insurance jumped by 9% to a ‘record high’ in 2017 looks desperate.”

According to the latest car insurance price index, published in January, motor premiums have risen at their slowest rate in 2017 for the first time in recent years, and declined 1.3% in the last quarter.

The decline was the largest quarterly decline in three years. Average annual premiums for 2017 rose by £60, a total rise of 8%. The figure is below the average year-on-year increase of £110 for the previous six quarters.

ABI UK Motor Annual Business Figures (£m) 

Year Total Outgo Net Claims Incurred Commission & Expenses Change in Provisions
2007 8,287 6,316 1,756 216
2008 8,713 6,802 1,900 11
2009 9,215 7,542 1,742 (69)
2010 9,982 8,302 1,425 254
2011 9,588 7,431 1,782 375
2012 8,931 7,087 1,993 (149)
2013 8,402 6,473 2,070 (141)
2014 7,858 5,991 1,908 (41)
2015 7,860 5,796 1,879 185
2016 6,490 4,797 1,693 (466)

Andrew Twambley, spokesman for campaign group Access To Justice, told Post: “After two weeks where insurer after insurer has reported hugely increased profits and massive dividend hikes, this latest PR feels like an attempt to distract attention from the real story.

“The real story is the impact of rising car insurance premiums on insurers’ profits. Direct Line Group saw a 52% increase in profits to £539m and a 40.2% increase in the dividend. Admiral saw a record profit for the group of £405m, a 45% increase on 2016. Esure saw profit before tax from continuing operations up 35.6% to £98.6m.

“Major insurers such as Admiral and Aviva have said that personal injury claims have fallen and the cost of such claims has also fallen, as has the Institute of Actuaries. We expect the latest figures from the Compensation Recovery Unit to confirm that 2017 saw another sharp drop in claims, and we expect that decline to be an accelerating trend.

“The longer the delays to these reforms, the clearer it is to everyone that the government’s plans seek to fix a problem that is already being fixed. In the meantime, insurers and their shareholders will enjoy a bumper year.”

Association of Personal Injury Lawyers president Brett Dixon told Post: “The cost of all personal injury claims, which are motor-related, are the lowest they have been since the ABI records began, according to the ABI’s own figures.

“The cost of personal injury claims and the number of personal injury claims are falling, so personal injury cannot possibly be related to premium increases.”

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