PI claims and motor premiums falling, says ABI

Car crashes: Cost of repairs on the up

There has been a “slowly decreasing volume” of personal injury (PI) claims since 2016, the Association of British Insurers (ABI) has said.

The statement will revive claimant arguments that the Civil Liability Act 2018 was not needed, but the ABI also said that LASPO only helped reduce PI costs “slightly”, with claimant lawyers continuing to receive 47p on top of every £1 paid out in compensation to clients.

However, the rising cost of repairing cars means that insurers are paying out more on vehicle repairs than bodily injuries, according to the ABI’s annual state of the market report.

It put the falling number of claims against the backdrop of how it has risen since 2005, “despite a 35% fall in the number of accidents”.

The most recent figures from the Ministry of Justice back up the downward trend. Its statistics for the third quarter of 2018 showed that PI claims fell 20% to 30,500.

“The decrease can be attributed to a change in Civil Procedure Rules on holiday package gastric illness claims, and whiplash reform,” it said.

The ABI report said that although the whiplash reforms in the Civil Liability Act did not take effect until next year, and a revised discount rate may not apply until this August, “the effects are already being felt by customers”.

It said: “The industry has promised that any cost savings for insurers as a result of the Act will be passed on to consumers. The signs are that this is already happening – after reaching a peak of £496 in the final quarter of 2017, motor premiums fell £24 through the first three quarters of 2018.

“This would not be the first time that insurers have passed on savings, with average premiums falling by £50 following the introduction of the LASPO 2012, with some suggesting the Civil Liability Act could have an impact of around £35 per policyholder.

“Overall, this Act is expected to bring about hundreds of millions of pounds in savings, as well as significantly smoothing the claims process for claimants.”

In relation to the discount rate, the report said the cut in February 2017 to the present -0.75% contributed to a £909m motor underwriting loss in 2016.

“As news spread that the method was to be adjusted, better in line with investors’ actual behaviour, this balanced out somewhat, with a £269m profit in 2017.

“Nevertheless, this profit still made up just 2% of gross written premiums for the year and was only the third time the industry had made an underwriting profit since 1994.”

The report added that, “with profitability a challenge, insurers are continuing to contend with high claim costs, driven up primarily by vehicle repairs”.

It said that increasingly sophisticated technology used in cars, while reducing the absolute volume of claims, pushed up the cost of repairing and replacing damaged parts.

“This has been exacerbated by a weakening pound pushing up the costs of importing the necessary parts to repair cars.

“Insurers are now paying out over £12m a day on repair costs alone, on top of the £9m for bodily injury claims.”

Repair costs are unaffected by the Civil Liability Act, while the market continues to await the Ministry of Justice’s response to the second part of its November 2016 consultation on whiplash reform, which looked at other areas such as credit hire and rehabilitation.

Qamar Anwar, managing director of marketing collective First4Lawyers, said the figures would not come as a great surprise to claimant lawyers.

“The government should be hanging its head in collective shame at once again allowing itself to be duped by the powerful insurance lobby.

“I hope ministers take note of these figures and hold insurers to their promise to pass savings from the Civil Liability Act onto consumers. Yet, with insurers now claiming the cost of repairing cars is rising, I doubt consumers will be receiving a windfall any time soon.”


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