Compensation culture is a "blight on our lives and our economy," said Lloyd's chairman Lord Levene. He said the trend was plundering the UK economy, and described the current system as "worse than a mess".
In a report, Lord Levene said the rise in claims was leaving insurers no choice but to increase premiums. The only people benefiting from the rise in compensation claims were the companies encouraging no-win, no-fee cases, said Levene.
He said the average cost of employers' liability claims had increased by 100% in the past five years, with changes to personal injury laws increasing claims costs by 40% to 50%. Actuaries had estimated the total cost to UK industry was around £10bn a year, said Lord Levene.
According to the report, Lord Levene said some improvements had been made, with an increase in mediation leading to quicker processes, greater clarity and reduced costs.
"But as claims across society increase, insurers, sadly, will have no choice but to increase premiums. We don't want those rises any more than consumers.
"But if we do not have enough capital to cover policies, we risk not being able to meet claims, and our reputation begins to unravel," concluded Levene.
