Insurers are bracing themselves for a landmark court ruling which would double the level of compensation awarded to accident victims.
Industry experts and personal injury lawyers agree this would have an immediate impact on the capital reserves of insurance companies.
Ian Walker, president of the Association of Personal Injury Lawyers, believes awards could be boosted in thousands of personal injury cases. His firm, Russell, Jones and Walker, handles 15,000 personal injury claims each year.
He said: "The feeling I get from members of the ABI and the Federation of Personal Injury Lawyers is that compensation awards are likely to increase, the only question is when."
Walker warned that any ruling by the Court of Appeal would immediately have an impact on thousands of cases tied up in the courts and leave insurers facing a drain on their reserves.
However, one analyst said insurers are prepared: "Almost all motor and personal lines insurers hold substantially more reserves than the statutory minimum of 20% of premiums. The industry's capital base is stronger than it has been for a number of years."
Lawyers are preparing personal injury cases for the sitting of five Appeal Court judges, including the master of the rolls, Lord Woolf, on February 28.
They will consider a recommendation from the Law Commission that court awards above £3,000, relating to pain and suffering and loss of amenity for serious injury should increase by up to 100%.
Walker said: "The judges will decide whether personal injury damages have failed to keep pace with inflation and redraw the compensation framework."
However, he believes the cases being reviewed are not typical of most personal injury claims because they involve complex cases such as long-term lung disease and post traumatic stress disorder.
He was also critical of the Government for leaving the task of reviewing the law to the Appeal Court.
He believes Parliament should have enacted the measure to ensure an orderly transition period. This was not possible because the Government already had a full legislative timetable.
An ABI spokesman confirmed insurers are concerned about the prospect of higher personal injury awards but added that it was prepared for such a contingency.
- Elsewhere, a Hereford and Worcester council warden has been awarded damages of £203,000 for stress incurred while working at a gypsy site.
The award, for Randy Ingram, is thought to be the largest ever made in a case of work-related stress.
