The financial impact of whiplash

Claims for whiplash injuries following car accidents have been identified by MPs as a major factor in the continuing rise in the cost of motor insurance.

According to the AA, annual premium increases in 2011 were around 15% which, on top of the rising cost of fuel, has proved a double whammy for the nation’s drivers.

Last month the House of Commons Transport Committee blamed the UK’s ‘compensation culture’ for the steep increase in claims involving whiplash injuries.

It pointed out that the number of claims is rising despite the fact that there are now fewer car accidents on Britain’s roads each year. It also blames claims management firms and personal injury solicitors that actively encourage individuals to make claims.

Worse still, whiplash is notoriously difficult for medical staff to identify, which fuels faked injury and fraudulent claims. Around 70% of personal injury claims in the UK are for whiplash – twice the average for other major European countries.

Government seeks overhaul of insurance

The government’s Transport Secretary, Justine Greening, described the UK as the “whiplash capital of Europe”, with more than 1,500 claims a day.

She said car insurance premiums for ordinary motorists are rising because of the cost of ‘referral fees’ (these are fees paid by claims management companies, law firms and insurers in return for the names of those involved in accidents). And, of course, they eventually filter through to the price drivers pay for their insurance.

The good news is, the government wants to ban such fees in personal injury cases. It also wants to limit the amount solicitors can charge for this sort of work.

But there are concerns that those involved in these claims will find other ways to generate revenue which again, will ultimately be at the expense of motorists.

The government may also introduce measures similar to those in Germany, where it is not possible to claim for whiplash if the vehicles involved in the accident were travelling below a certain speed.

Justine Greening has questioned how someone can suffer a whiplash injury if their car is hit from behind at just 3mph. Action needed to rein-in spiralling costs

She also wants to see action taken on the cost of repairs, and has called on insurance companies to do more to protect the interests of honest motorists.

Action could include systems to help detect fraud and a greater willingness to contest personal injury claims. In the past insurers have paid claims, despite suspecting they were false, because the cost of paying compensation was likely to be lower than the cost of going to court.

According to the Association of British Insurers (ABI), for every £1 they receive in premiums, insurers are paying out £1.21 in claims and expenses – hence the seemingly relentless above-inflation rises in insurance costs.

Insurers want a higher burden of proof for whiplash injury alongside more evidence of any loss or cost suffered by the claimant.

Shopping around

This makes it more important than ever for drivers to compare premiums offered across multiple insurers. MoneySupermarket can do the leg-work for consumers who want to compare the best deals on the market for their circumstances.

Car insurance expert at MoneySupermarket, Peter Harrison, said: “Fed up motorists want to see urgent action on soaring insurance premiums, so anything the government and the insurance industry can do, will be very welcome.

“But can we rely on the insurance industry to pass on all – or indeed any – savings they make? This is why the most important thing is for motorists to take back control where they can and scour the market for the cheapest car insurance deal for their circumstances.”

And with 25% of MoneySupermarket customers saving £400 a year by switching their car insurance to a cheaper provider, it’s well worth the effort.

Please note: Any rates or deals mentioned in this article were available at the time of writing.