Reinsurers drive up driving costs on accident claim concerns

Weekly whiplash news review: 7 days ended 2 Jan 2013:

Concerns over how insurers provide personal injury compensation to whiplash claim victims have caused reinsurance specialists to drive up costs for motorists.

It was revealed this week that reinsurers – insurance firms that provide cover for other insurance firms – have been pushing up underwriting costs by more than 20 per cent based on increased risk factors regarding road traffic accident payouts made by their customers. Reinsurance firms are so petrified of how much car insurance claims are costing their customers in payouts that they are driving up their costs in order to offset the higher risk – forcing the average car insurance company in the UK to turn around and pass on the cost increases to the motoring public in the form of sky-high premium prices.

The Government has had an eye to limit the costs of keeping a car recently by finding ways to crack down on insurance fraud, particularly whiplash injury fraud, in the hopes it will result in lowered risk factors. Despite this, reinsurance specialists have grown more concerned about valid claims stemming from life-changing injuries, such as head and neck injuries leading to loss of mobility and cognitive ability; courts have been providing compensation arrangements that not only have an initial lump sum to such claimants but regular payments to cover the cost of long-term care, and it is these periodic payment orders that has the reinsurance industry in a panic.

Periodic payment orders can be in the hundreds of thousands of pounds a year for a single claimant if the injuries are serious enough, and the number of these payments has ballooned to around 400 over the last four to five years. Industry experts say that these figures could soon grow to eclipse more than one third of the general liabilities of the overall UK motor insurance industry.


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