Motor Insurance fraud costing consumers over £900 million a year; that’s £50 per policy

Former Justice secretary Jack Straw began campaigning for a car insurance industry shake up in June after it was found that insurers sell customer details onto other companies.

So far, Axa are the only UK insurer to stop this action and they are now urging the government to cut the fees of personal injury lawyers to a ëno win, no feeí arrangement.

The system of ëreferral feesí pushes up the cost of car insurance as those involved in an accident are approached by personal injury lawyers. The number of personal injury claims has increased dramatically over the last 12 months, causing premiums to rise. Mr Straw described this notion as a ìracket.î

On average, insurance premiums rose by 31% last year. The Department of Transport statistics reported a 10% fall in the number of road traffic accidents involving personal injury over the past three years; yet personal injury claims on motor insurance policies have increased by 43% over the same period.

Figures show that for every £1 motor insurers pay out in compensations, an extra 87p is paid out in legal costs. They only way the motoring industry can recover is by pushing up premiums. This is bad news for drivers as they end up paying for it.

Insurance Expert Graeme Trudgill points out how much these false claims cost the consumer, ìThe cost is over £900 million a year for motor insurance fraud which adds £50 to every motorist’s policy.

If fraud was to end, drivers could automatically wipe £50 a year off their bill.

Mr. Straw accused companies of ìambulance chasingî after uncovering a scandal in the insurance industry. The cost of a personal injury claim has doubled in the last 10 years and there are many cases of fraudulent ëwhiplashí injury.

Paul Evans, chief executive of Axa UK , said, “Whilst we welcome signals that the government is minded to impose a market-wide ban on referral fees, they are a symptom – not the cause – of the increase in personal injury claims.”

“We believe more radical steps are needed. Firstly, a robust review of the fixed fees earned by personal injury lawyers,” he said.

Mr Evans believes more should be done to muscle out false claims, ìMeasures are also required to increase the burden of proof for whiplash to drive out fraudulent claims.

There needs to be a comprehensive medical evaluation of muscle damage following a typical low impact road traffic accident, as it is these incidents that are driving the increase of personal injury claims which have caused motor premiums to rise.î

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