Whiplash claims continue to fall...

...so why are insurance premiums still rising?

Whiplash claims and compensation to be changed in government plans

The Times has reported on figures released showing that despite saving £500m a year on personal injury claims following recent law reforms, motor insurers have increased premiums by as much as 20%, adding about £115 to typical premiums.

Stories of ‘dodgy’ whiplash claims and the ‘ambulance chasing’ lawyers who encourage them have been prominent in the news in recent years, thanks to the well-funded media relations departments of the major insurers. They have been at the forefront of a campaign to promote the view that the UK has become a hotbed of insurance fraud and in the grip of a compensation culture, adding unbearable cost to the premiums of honest British motorists.

This led to legal reforms that by 2013 meant the legal fees that road accident victims could recover from the insurers were roughly halved, their ability to obtain proper medical evidence to back up their compensation claims was restricted, and they would almost always have to pay towards their own legal fees.

Let’s not forget, the people making claims are people who have been injured in accidents, and the insurers are the representatives of those who have broken the law and inflicted the injury. Whilst there are, and always have been, a very small proportion of people who attempt to make false claims (as they do in any area of insurance), there has never been strong evidence that any rise in the number of claims being made has been driven by fraudulent claims.

If the 2013 reforms were an attempt to tackle insurance fraud, it was one that was always likely to cause a lot of collateral damage. There were already (as you might expect) various laws against insurance fraud, and the changes only had the effect of making claiming compensation more difficult and expensive for everybody, the vast majority of whom were innocent victims.

But, not altogether surprisingly, this was not enough for the insurers. Stories continued of fraudulent claims, exploiting unspecified legal loopholes, and warnings were renewed that the whole compensation system was causing unnecessary misery and expense to the honest motorist. Last year Esure warned its profits had fallen by a fifth due to a ‘surge’ in fraudulent whiplash claims, and Axa described the situation as ‘worse than before’.

Then, last November, the government announced plans to ban most whiplash compensation altogether, and to relieve the insurers of having to pay anything towards their policyholders’ victims’ legal costs at all in claims worth up to £5,000. The predicted savings to insurance companies were to be around £1bn.

The insurers were predictably delighted, promising to pass on savings of around £50 per year on insurance premiums. The government pledged to ensure they do so.

But now we have this. Insurers have saved an estimated £500m last year and, it is believed, the year before, but far from the promises of a new dawn of cheap motoring, premiums have gone up, not down.

Whiplash claims have certainly gone down. According to figures provided by the government’s Compensation Recovery Unit, 235,000 fewer whiplash claims were made in 2015/16 compared to 2010/11, and the proportion of road accident claims that were whiplashes has dropped from 72% to 44% over the same period.

So the figures tell us whiplash claims have dropped markedly, the insurers are saving stacks of money, and yet the insurance companies tell us we live in a society dominated by a compensation culture, and because whiplash fraud is so utterly widespread, we all must pay the insurers more and more money. Who to believe?

It seems harsh in the extreme to abolish compensation for the majority of whiplash injuries to address a whiplash epidemic that seems not to exist after all. Those that will suffer will be people who have been injured by somebody else, illegally.

Incidentally, Axa Insurance’s UK earnings rose 25% in 2015, their fifth successive year of double digit growth. Esure’s profit before tax rose 30% in 2015.

For more information on the government’s proposed reforms, and how you can have your voice heard in the consultation process, visit the Access To Justice Action Group.

For further information on how Hunt & Coombs Solicitors can help you with a Personal Injury Claim please contact our PI Team by email or call 01733 882800.


Richard Moon, Senior Solicitor in the Personal Injury Team

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This article has been prepared for general interest and information purposes only; it does not constitute legal advice and should not be relied on as such. While all possible care has been taken in the preparation of this article, no responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by the firm or the authors.