Car insurance premiums could fall by £1.5bn if insurers handle claims directly

Article date: 14 February 2013

  • Whiplash claims now add £118 to every motor premium
  • 94% of motorists blame involvement of third parties for increased premiums

UK drivers overwhelmingly want to see the back of the personal injury (PI) ‘compensation culture’ that is now costing every motorist an extra £118 on their annual motor insurance premium, reveals Aviva in a new report issued today.

Aviva’s report 'Road to Reform: Reducing Motor Premiums by Reforming the Personal Injury Claims Process’ is launched ahead of the Ministry of Justice Whiplash Consultation closing on the 8th March 2013. The report sets out Aviva’s proposals to improve the motor insurance PI claims system and reduce excessive costs that have contributed to premiums rising by 80% since October 2008. Aviva’s research has also found that if insurers handled claims directly, an estimated £1.5bn of excess cost could be stripped from UK motor insurance premiums.

Dominic Clayden, Claims Director at Aviva, said: “Our primary concerns are that injured parties receive care and compensation as quickly as possible and that all motorists benefit from a reduction in the excessive costs that have built up in claims over the past few years. We are campaigning for a more efficient system that removes the ‘interested parties’ and requires people to deal directly with the insurer of the at-fault party.

Cutting waste from the system
Central to Aviva’s proposals for reform is its call for a legal requirement on PI claimants to contact the ‘at fault’ insurer in the first instance rather than going to or being referred to intermediaries including claims management companies and PI lawyers. This will result in a halving of the cost per claim as third party legal fees (average current legal fee is £2500 for a ‘typical’ whiplash claim) are removed from low-value personal injury claims, a saving that will benefit all motorists in reduced premiums. 
Aviva’s research shows that there is no difference in the compensation awarded to the injured party if handled directly or via third parties. However, the multiple third parties that can get involved in a claim add significant cost in fees. Aviva estimates that handling claims directly will cut £1.5bn of excess cost, approximately 50% of the current cost of handling the 550,000 whiplash claims received by insurers every year. This cost reduction could lead to premium falls of around £60 a year for the average driver.

Care rather than cash compensation
Aviva also supports the introduction of a truly independent panel of medical experts to determine whiplash cases with a greater focus upon targeted rehabilitation, which consumers support.

Aviva research of over 2000 drivers revealed that almost 2 in 3 (63%) think that people seek compensation to get money to spend on whatever they choose rather than rehabilitation. This view is supported by Aviva’s research of almost 400 UK drivers who have made a PI claim; this revealed that only 33% of people spent their cash compensation on medical treatment or physiotherapy, others said it was used to pay off household debt (29%), to buy luxury items such as TV’s (12%) or to go on holiday (9%).  Other uses admitted to include buying a car, putting it into savings and paying for university.

What drivers think
Aviva’s research of UK motorists shows they identify a strong link between rising PI claims and rising premiums, with 95% saying unnecessary claims are behind premium increases. Additionally 94% blame the involvement of third parties and 93% the rise in whiplash claims specifically. 

The changes that the majority of motorists back are as follows:

  • No cash compensation for minor motor accidents where no-one was injured - simply the insurance cover for the cost of repairing the vehicle (85%)
  • A preference for care above cash - insurers should provide access to rehabilitation for their injuries, not cash compensation (55%)
  • A ban on excessive legal fees (69%) and the unnecessary involvement of lawyers or claims management companies (67%)
  • Independent medical advisers not connected to the person making the claim to assess injuries (59%)
  • Tighter regulation on how claims management companies and personal injury lawyers market their services (95% support)
  • A removal or clamping down on exaggerated claims via more stringent procedures to challenge suspicious minor injury claims. (83% support)

Dominic continued, “Our figures for average compensation settlements show that dealing direct with an insurer directly results at least as much compensation for the claimant and has the advantage of being quicker - meaning their treatment and rehabilitation can start almost immediately. Our focus is on their recovery and settling their claim quickly and fairly. It would also prompt a significant reduction in the costs of the current system which would benefit all UK motorists, who will begin to see a reduction in their premiums.”

Download the full Road to Reform report PDF (897KB)

Download the Infographic PDF (471KB)

1. Survey conducted by Opinion Matters among 2,437 adults who drive, including 383 who have made a personal injury claim. December 2012

- Ends -

If you are a journalist and would like further information, please contact:

Erik Nelson: Aviva Press Office: 01603 682264; Mobile: 07989 427086

Laura O’Connell/Hugh Murphy: The Wriglesworth Consultancy:   020 7427 1400
Notes to editors:

Aviva provides insurance, savings and investment products to 43 million customers worldwide.
We are the UK’s largest insurer with over 14 million customers and one of Europe’s leading providers of life and general insurance. We combine strong life insurance, general insurance and asset management businesses under one powerful brand. We are committed to serving our customers well in order to build a stronger, sustainable business, which makes a positive contribution to society, and for which our people are proud to work.

We are ranked as one of the UK’s top ten most valuable brands and Aviva Plc is in the top 10% of socially responsible companies globally in the Dow Jones Sustainability World Index.  In 2011 we invested £5.3m into our UK communities. One in three of our employees were involved in community investment activities which included giving nearly 33,000 hours.
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