Costs faced by the personal injury insurance industry are likely to rise from £8.4bn in 2010 to £9.7bn by 2014 driven by the growth in the number of motor personal injury claims according to a report by Datamonitor.The market analysts added the rise would continue despite new regulations being brought in to tackle the problem.
The report revealed that it is motor claims that continued to dominate the personal injury market as a whole accounting for just under 80% of the total despite a fall in the number of road traffic accidents. It added that employers' liability, public liability, and clinical negligence all contributed to the market, but to a lesser degree.
Barbara Kubis-Labiak, analyst at Datamonitor, said: "The rising costs of motor personal injury claims were one of the key reasons for the review of civil litigation costs by Lord Justice Jackson.
"With the continued aggressive TV and marketing campaigns by solicitors and claims management companies, there has been a rise in disproportionate claims, with exaggerated claim sizes and unnecessary costs, making regulatory changes essential."
However, according to some solicitors and insurers who spoke to Datamonitor for their report, even if all the changes suggested by the Jackson review were implemented, personal injury claims costs would continue to rise until 2014 at least, albeit at a slower rate.
Referral fees
The report suggested that insurers largely agreed that banning referral fees would not result in driving down costs, as it would not do anything to address the issue of high solicitors' costs. Datamonitor claimed that according to the insurers and solicitors interviewed for the report, neither industry will start reducing fees.
The report suggested that insurers largely agreed that banning referral fees would not result in driving down costs, as it would not do anything to address the issue of high solicitors' costs. Datamonitor claimed that according to the insurers and solicitors interviewed for the report, neither industry will start reducing fees.
Ms Kubis-Labiak continued: "Although we believe that changes to regulations over the next few years will do something to tackle rising costs, this will only result in a marginal slowdown."
She concluded: "In fact, after taking into consideration all of the expected changes, we have only revised our long-term forecast for the 2010-14 growth of claims costs down from 5.4% to 3.7%. Therefore costs will remain a problem and time as well as further changes will be needed to finally bring costs under control."
