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Claims costs on the rise

Costs faced by the personal injury insurance industry are likely to rise despite government reforms of the system, according to a report by market analysts Datamonitor.

The report found that insurers have little faith that litigation changes will see solicitors lower their fees.

The industry still expects personal injury claim costs to rise for the next three years at least, albeit at a slower rate, from £8.4 billion in 2010 to £9.7 billion in 2014.

Barbara Kubis-Labiak, analyst at Datamonitor, said: ‘Although we believe that changes to regulations over the next few years will do something to tackle rising costs, this will only result in a marginal slowdown.

‘In fact, after taking into consideration all of the expected changes, we have only revised our long-term forecast for the 2010-14 growth of claims costs down from 5.45 to 3.7%.

‘Therefore costs will remain a problem, and time as well as further changes will be needed to finally bring costs under control.’

The Ministry of Justice plans to cap success fees at 25% of damages in personal injury cases, to be paid by the claimant rather than the defendant, and increase general damages by 10%.

The rising cost of personal injury claims, particularly after road traffic accidents, was one of the key reasons behind litigation reform.

Motor claims are now believed to account for almost 80% of the personal injury market, with employers’ liability, public liability and clinical negligence also contributing to a lesser degree.