Motor insurers’ claims bill to rise, says report

9th, May 2008

A report by an independent market analyst, Datamonitor, says that increases in medical and legal costs in personal injury claims are increasing personal injury claims costs.

Analyst Datamonitor found in preparing Claims management in UK General Insurance 2007, An examination of claims trends and statistics that personal injury claims arising from road traffic accidents remain the single largest contributor to claims inflation with total motor claims costs forecast to reach £10.9 billion by 2012.

The report found that improvements in road safety have reduced the number of road traffic accidents, insurers have continued to see a rise in the cost of personal injury claims driven by increases in medical and legal costs. Between 2002 and 2006 the total number of accidents fell from 222,000 to 189,000. However, the average claim paid to an injured party increased from £4,277 in 2002 to £5,331 in 2006, exerting an upward pressure on the overall average motor claim cost which increased to £1,636 in 2006.

Datamonitor financial services analyst, Mahreen Hussein, said: “personal injury claims continue to constitute the largest bill for motor insurers. Strong rates of inflation relating to medical costs and legal costs are the primary reason behind escalating bodily injury costs which have grown significantly in recent years.”

In addition to increases in bodily injury costs, the report found that the cost to repair a vehicle has increased with both garage rates and the costs of replacement parts is rising. Datamonitor forecasts that the total claims bill facing motor insurers will increase from £8.5 billion in 2007 to £10.9 billion in 2012.

The report also estimates that the fact that periodical payment orders are linked to the ASHE 6115 index instead of the RPI will also lead to an uplift in claims costs.

In aligning compensation with ASHE 6115 Lord Justice Waller said:

“Indexation on the basis of ASHE 6115 has been established after an exhaustive review of all the possible objections to its use, both in itself and as applied to the recovery of costs of care and case management.”

Motor insurers’ claims bill to rise, says report

A report by an independent market analyst, Datamonitor, says that increases in medical and legal costs in personal injury claims are increasing personal injury claims costs.

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