Claims inflation for motor personal injury claims could rise to unsustainable levels, a report by the IUA and ABI has warned.
Massive increases in government clawbacks for health and social care have already prompted rises.
The Fourth UK Bodily Injury Awards Study showed that awards for personal injury have increased at a rate of 9.5% per annum over the past 10 years, to almost £2bn per year.
Though the rate of claims inflation has fallen to 7% over the past three years, impending legal changes – including the law on damages, rising costs of care and rising numbers of whiplash-related claims – could see the bill rise further.
Government reimburse-ment for all personal injuries, the majority of which are motor related, have increased from £105m in 2002/03 to £128m in 2006/07.
In addition, for every £1 paid out by insurers, a further 43p goes on legal fees – up from 30p in 2005.
The report also found that the number of claims has increased by 3% per annum, between 1996 and 2006, despite the total number of road traffic accidents falling by 20% in the same period.
Claims over £5m have also increased by 30% per year since 2002.