Insurers ‘using fraud to justify bigger premiums’

Honest motorists are being taken for fools by insurers using a record number of whiplash claims to justify price rises almost ten times the rate of inflation, a personal injury solicitor has claimed.

The average premium for comprehensive motor insurance has increased 9 per cent since October last year, adding £38 to the average policy, according to the Association of British Insurers (ABI). In the same period the consumer prices index of inflation rose 1 per cent.

Insurers, who have been deluged with a record number of whiplash claims in the past year, blamed the rising cost of personal injury compensation, higher repair bills and increases to insurance premium tax.

The ABI said that the average payout on bodily injury claims had risen 5 per cent to £10,955 this year. Repair bills have jumped by a quarter in the past three years and insurance tax now adds 10 per cent to bills.

However, Tom Jones, of Thompsons Solicitors, which processes whiplash claims, accused insurers of trying to mislead motorists, claiming that the cost of claims fell last year and was 30 per cent lower than in 2010.

“This isn’t a sector buckling under the weight of ‘fraud’ as they would want the British public to believe. It is a booming industry with healthy profits and cash reserves paying out huge dividends,” he said.

“If there is fraud it should of course be tackled but the issue is being cynically manipulated. Fraud is being repeatedly used as a battering ram for reform that would actually mean only more profit for insurers. The insurers are taking the British public for fools — they haven’t defined fraud, they haven’t provided any independent evidence that it actually exists at the levels they claim and they aren’t reporting it to their shareholders as a ‘material risk’.

“Fraud is being cynically exaggerated to attack the rights of honest motorists and to justify premium increases. It’s high time the insurance industry stopped their manufactured hysteria about fraud and concentrated on providing greater transparency so consumers can see if the ever-growing premiums are justified.”

Insurers called on the government to press ahead with reform to personal injury compensation and for action against fraudulent whiplash claims to help drive down the cost of cover.

Rob Cummings, of the ABI, said: “The government has a key role to play in ensuring the best insurance deals for honest motorists.

“They need to urgently consult on the planned reforms to address the compensation culture, which honest motorists have been waiting nearly a year for them to introduce, and avoid any further hikes in tax.”

This month it was revealed that the government had shelved reforms to end the right for cash payouts for whiplash injuries. The reforms would have meant victims could only claim medical treatment, taking an estimated £50 off the average car insurance bill.

Insurers have also called on the government to consider making automatic emergency braking technology compulsory in new vehicles to cut the frequency and severity of collisions.