Motor claims on the rise, but fraud is falling, actuaries find

Car accidents: injury claims rising faster than damage claims

Car accidents: injury claims rising faster than damage claims

The number and cost of motor claims are on the rise again after a post-LASPO dip, but there is evidence to suggest that work to reduce fraudulent claims is having an impact, the Institute and Faculty of Actuaries said today.

Issuing the interim results for its 2014 annual report on third-party motor claims, based on data provided by 18 of the top 20 UK motor insurers, the institute reported that the percentage of accidents involving a personal injury claim increased by 1.7% during 2014, following a 10% reduction in 2013.

But the report said: “It is too soon to say whether these increases represent normal fluctuations or a return to the trend of year-on-year increases seen prior to 2013.”

It added: “The long-term effects of legal changes such as LASPO remain uncertain. Whilst at a headline level, reductions in average incurred cost have continued in 2014 (-2%), when considering claims on a settled basis, average costs are increasing again (3%), in contrast to a significant fall in 2013 (-15%) immediately after LASPO came into force.”

It said figures showing that the income of claims management companies was rising quickly while their numbers were falling was “likely to be driven by increased volumes of [injury] claims”.

Claims for car damage rose only 0.2%, in line with a small increase in car usage. The average damage claim was for £2,430 in 2014, with injury claims averaging £8,680.

But the report also said that the severity of small claims continued to fall – down 2% last year, following a drop of 7.3% in 2013 – which “may suggest that actions to reduce fraudulent or exaggerated claims are effective”.

So far as insurance premiums were concerned, they rose “slightly” in the second half of 2014 after two and a half years of reductions, “only to fall back in the first quarter of 2015”.

The North West continues to be the main personal injury hotspot. Co-author David Brown said: “The report finds that despite a significant drop in the overall number of authorised claims management companies since government reforms were put in place in April 2013, it appears that in regions where there is a large number of claims management companies, there is also a correspondingly high proportion of third-party personal injury claims being filed compared to property damage claims, and the reforms have not changed this.

“The impact of recent claims inflation will be greatest in those areas of the country with the most claims. And this will mean that pressure to increase premiums will be greatest there too – and here I fear that Liverpool is front of the queue.”

Andy Cullwick, head of marketing at leading marketing collective First4Lawyers, said: “Sadly, the report seems to be written to cause yet more division and negative headlines for the personal injury sector. It also implies a correlation between the number of claims firms in the North West and the number of claims in Liverpool. But where is the evidence to support this?

“The report suggests that claims management companies are the driver of the claims. However, it doesn’t offer any supporting statistics to show the primary source for the claims. The only thing the introduction of LASPO has done is to increase the cost of marketing for firms working in the personal injury claimant sector.

“The insurance industry is failing to understand the basic premise that genuine accident victims are allowed to make a claim for injuries that may be keeping them off work or financially out of pocket.”

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