NEWS
23/02/2012 01:17 GMT

Personal Injury Claims Costing Consumers Millions Each Year

Legal fees to settle personal injury claims after motor accidents are costing UK consumers a total of £2.4m a day, the insurance industry says.

This legal fee bill is the equivalent of £1,666 added to motor insurance premiums every minute, said the Association of British Insurers (ABI).

Adding that legal costs often exceeded compensation payments, the ABI said revealed that:

  • One insurer's average claimant legal costs in 2010 represented 142% of the sums received by injured victims
  • A recently reported compensation claim for a work-related injury for £12,750 settled out of court attracted legal costs of £74,000
  • A legal bill of £37,250 was run up in settling a claim for £15,000 in respect of injuries sustained by a woman who fell into the moat at a castle
  • Between 2004 and 2011 there has been a 5% rise in NHS legal costs, but a 130% increase in claimant legal costs
  • In the financial year 2010/11 the NHS paid out £257m in lawyers' fees following claims.

James Dalton, the ABI's head of motor and liability insurance, said: "Since its introduction in 2010 the fast-track process for settling lower-value personal injury claims has led to significantly quicker compensation payouts. But the fixed costs in the process remain too high.

"The UK's compensation system is riddled with disproportionate and excessive legal costs, often exceeding compensation awards. This means higher insurance costs for motorists and businesses and a heavy cost burden on local authorities and the NHS."

He went on: "The Government must press ahead with the much-needed reform of our dysfunctional compensation system, which, together with the ban on the selling on of personal details of potential claimants, will enable solicitors' fixed fees to be reduced to more realistic levels.

"Lower legal costs will help bring down the cost of motor insurance for all drivers."

A Ministry of Justice spokesman said: "Too many people are making money from encouraging others to make 'no win no fee' claims, which can drive up costs like motor insurance and fuel fears of a compensation culture.

"We have already committed to reducing the current £1,200 fee that lawyers can earn from small value personal injury claims and we are working with claimants and defendants to determine how this can best be achieved.

"We are also taking forward plans to radically reform the system. Under our plans total costs will be reduced and unnecessary claims discouraged because the financial and legal risk of each case will be shared more evenly by all involved. Valid cases will still be able to be pursued."