Industry disappointed by watered down personal injury reforms as unions blamed for blocking employers’ liability cases.

The UK’s leading insurers lined up against the government this week, predicting a glut of court cases arising out of its watered down reforms to the personal injury claims process, published on Monday after months of delay.

As predicted by Insurance Times, the government has limited the reforms to motor-related claims of up to £10,000, prompting dismay and fury across the insurance industry.

The exclusion of other personal injury claims, particularly employers’ liability claims, has been blamed on trade unions, which have a vested interest in such claims and are understood to have been lobbying hard. ABI director general Stephen Haddrill condemned the exemption as “bizarre and illogical”.

Major insurers have refrained from challenging damages and costs settlements since May 2007, when the government first published radical proposals for the overhaul of the personal injury claims system. Now the proposals have been watered down, they are expected to return to litigation.

“It’s going to be messy,” said Norwich Union director of claims Dominic Clayden. “It’s back to the courts. We have been sitting down with our lawyers – we are going to make every technical point [in court, challenging cost settlements] that we can.”

Zurich technical claims director Steve Thomas agreed. He said: “We will be applying increased scrutiny to costs that are submitted and we will challenge through the courts any exaggerated or dishonest billing that we come across.”

The insurance industry was united in its disappointment with the final proposals for the overhaul of the system, which include the pilot of a fast track for motor claims under £10,000.

The original proposals, that included an overhaul of after-the-event (ATE) insurance, have been abandoned. There has been no decision on whether to introduce fixed legal fees for all claims – seen as crucial by the insurance industry, which believes lawyers are making fat profits from small claims, often winning more in fees than their claimants are awarded in settlements. An advisory committee has been formed to consider fixed fees, with no date set to report back.

Andrew Parker, a partner at law firm Beachcroft, said: “We had this grand plan [the original proposals] produced in April 2007, and a lot of people have put a lot of time and effort into responding. It was a waste of time. What we now have does little more than tinker with what we already had.”

The government also came under fire for publishing the long awaited final proposals just days before parliament’s summer recess.

Despite the universal disappointment, several figures in the industry were urging their contemporaries to make a success of the pilot fast track system for motor claims, and continue to lobby the government to expand it. Mike Faulkner, Cunningham Lindsey’s training and compliance manager, said: “It is now incumbent on the stakeholders to show [the government] that this will work.”

AXA’s director of claims Steve Williams said he expected further reforms to follow, and said the insurance industry needed to keep lobbying.