19 January 2015Print This Post

Cost of PI claims dropping fast, actuaries confirm

car crash

RTA clais: fall in cost and frequency

Legal fees for personal injury cases worth up to £100,000 fell by 65% in 2013, with an overall reduction of 14% in the cost of third-party injury claims, the Institute and Faculty of Actuaries has reported.

The finding reflects the government’s massive cut in RTA portal fees, from £1,200 to £500, implemented in April 2013.

In the latest version of a report first released in October, the institute said the frequency of personal injury claims had continue to be 10% less in 2013 – the first fall since 2007.

“The effect of legal changes such as LASPO continues to be felt across the industry”, David Brown, one of the authors of the Institute’s report, said.

“This has not just meant a reduction in legal costs, but, at least for now, fewer claims being brought following a decline in the numbers of claims management companies.”

Mr Brown said the reductions had been “anticipated by insurers” in reduced insurance premiums. “Such a benefit can only be expected to be a one-off adjustment, and normal inflation means that consumers could see rates increase in the future,” he said.

Mr Brown said it was “not yet clear” what the impact would be of the increased number of alternative business structures.

“These structures allow insurance companies, brokers and accident management companies to refer clients to their own law firms, and generate revenue from legal services,” he said. “There is certainly scope that these organisations may take up where claims management companies left off, and that we see a new surge in claims costs.”

The institute reported an increase of 11% in the cost of personal injury claims worth over £100,000 in 2013, “driven by” a 14% increase in the average cost of claims, and reduced “slightly” by a fall in the number of these claims.

“The increase in average cost is greatest in claims between £2m and £5m”, the institute added.

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