CBI president Sir John Egan has asked the government to take action in a move to ensure only legitimate compensatory claims proceed.
Sir John Egan has spoken of the growing `compensation culture' that has grown stronger in recent years since the introduction of the conditional fee arrangement.
In the annual Airmic lecture, Egan called on the government to take action.
Egan said: "As long as there's no risk on behalf of the claimant, the system will continue to be ripe for exploitation.
"Access to justice is a fundamental right, but perhaps the balance has shifted too far. We need to ensure that legitimate cases proceed while spurious claims are dismissed. One suggestion would be to introduce a `pre-trial arbitration' to sort out speculative claims from genuine cases."
Egan cited the increase in premiums as another major problem facing business insurance. Egan explained: "The average increase for ELCI [employers' liability compulsory insurance] in 2002 was 50% for public and product liability it was between 30% and 40% and professional indemnity as much as 60%.
"Indications are that 2003 saw significant increases as well. Although they were not as severe as 2002, this state of affairs is clearly unsustainable... especially for smaller companies experiencing real difficulties with affordability of insurance."
Egan also discussed the proliferation in shoddy building firms and called on the government to "clamp down on `cowboy' firms evading insurance and gaining unfair competitive advantage".
However he did praise the government for "reviewing the need to insure 300,000 of the smallest single-owner employer companies".
The insurance industry in turn also received praise from Egan. He commented: "Taking action on longer renewal periods by insurers and brokers and for helping trade associations and other access the insurance market more easily."
