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RISK IN CONTEXT

Combating the Rising Trend of Motor Claims

Posted by Robert Lewis 31 May 2016

The cost of motor claims is on the rise. According to the Association of British Insurers, motor insurers paid out GBP27 million per day in motor claims in 2015, a 58% increase from 2014. However, measures in recent years have improved the safety of both roads and vehicles. So, the question remains, why are claims still rising?

One theory is that, as cars become more automated and equipped with features such as antilock brakes, warning technology, and even automatic parking, drivers have become more reliant on technology and less cautious behind the wheel. However, certain data has shown this increase is likely to be as a result of a rising number of fraudulent claims.

Fraud costs increasing

While the cost of claims has increased, the number of car crashes notified to the police over the past four years has reduced by 18%. Meanwhile, in 2015, there were 67,000 detected fraudulent motor claims valued at GBP837 million, the Association of British Insurers has found. These fraudulent claims are from both individuals and criminal gangs formed to carry out organised fraud often referred to as “crash for cash”.

One type of claim that has become a major fraud issue in the UK is whiplash claims. On average, whiplash claims cost the UK GBP2.5 billion each year, with one in nine of these suspected to be fraudulent to some degree, according to data from Aviva.

Fraudulent claims do not just impact insurers as the costs are passed on to the drivers through insurance premium rises to cover the cost of increasing claims.

In his budget statement on November 25, 2015, the Chancellor of the Exchequer announced that the UK Government intends to “introduce measures to end the right to cash compensation for minor whiplash injuries”. George Osborne advised that, after the measures take effect in April 2017, consumers should be able to save GBP40 to GBP50 per motor insurance policy.

What’s the solution?

As the saying goes, for things to change, things have to change. All parties have their part to play, as follows:

• The motor industry should work to continue to improve vehicle safety.
• Drivers should heed government changes and insurance warnings.
• The insurance industry needs to continue to invest in fraudulent claims.
• The UK Government should work to reform low value claims procedures and introduce legislation to address whiplash claims.

Robert Lewis