By Ralph Savage
A dip in the rate of bodily injury award inflation over the last three years could be reversed, warned the actuaries behind the industry's latest report.
Following the launch of the Fourth UK Bodily Injury Awards Study this week, Mike Brockman, partner at EMB, said that despite inflationary pressures apparently easing over the past three years, this should not hide a number of factors which could reverse these falls significantly.
"Over the last three years, inflationary pressure has dropped to 7% from the average per annum of 9.5%. However, this doesn't hide the fact that periodical payments have not yet had an impact on claims, and indexation cases such as Thompstone could result in higher costs."
Paul Parke, injury risk partner at Beachcroft who was on the legal working party for the report, concurred: "We concluded that take-up of periodical payments remains low due to a lack of enthusiastic support from claimants and the court. However, should the courts award indices other than retail prices, the government's assurance that they will be costs-neutral for the industry is likely to ring hollow.
"The trend for higher levels of compensation and legal costs, highlighted in this latest report and mirrored in the earlier awards studies published in 1996, 1999 and 2003, is unlikely to abate," he said.
Mr Brockman hailed the report - which was commissioned by the Association of British Insurers and the International Underwriting Association - as the most detailed ever compiled, with the 218 pages derived from over two million motor claims in the past 10 years.
APIL: INSURER MOANS ARE LESS VALID CONSIDERING 85% FIXED COSTS
The fixed fee environment for claims below £10,000 has contributed directly to lower claims inflation in the last three years, according to a leading claimant legal expert.
Amanda Stevens, vice president of the Association of Personal Injury Lawyers pointed out the fact that overall inflation between 2003-2006 was 7% against the average rise of 9.5% per annum between 1996-2006.
"For the last three years we have had fixed costs on claims values up to £10,000 and that represents 85% of all claims in the market. For insurers to have this level of certainty is of great benefit to them."
Ms Stevens said the fourth UK bodily injury awards study represented good news for consumers, in particular the fact that speeds of payments had increased over the last ten years, and reserves can be set more accurately. However, she denied the fact that claim numbers rising was an example of a compensation culture. "If you have an insurance policy you expect to be able to rely upon it. We are not here to praise the stoic; injuries cost the NHS and result in working days lost."
ABI WHIPPING UP A STORM
The insurance industry has vowed to tackle whiplash claims in 2008, after it suggested they could be responsible for rising volumes despite falling accident rates.
Justin Jacobs, head of liability at the Association of British Insurers, said the industry was planning a whiplash summit in Spring 2008. He said the public policy message from the Bodily Injury Study was that it demonstrated a need for reform of the personal injury claims process. He added the report's timely publication - approximately three weeks before the Ministry of Justice reports back on its latest personal injury reform consultation - would benefit the consumer. "With 10% of all claims costs going to lawyers it will provide further ammunition to prove to the government that it is an inefficient method."
This article appeared in Post Magazine
