Royal & Sunalliance has called for urgent action to counter the soaring cost of liability claims.

The company says that, in the last two years, there has been a 25% increase in settlement costs because of higher claims volumes and higher damages awards.

Among the contributing factors are a sharp rise in “no win, no fee” actions following the introduction of conditional fee agreements in 2000, and the Court of Appeal's decision to increase personal injury awards for pain and suffering.

“Insurers and businesses are facing a “no win” situation unless immediate action is taken to increase premiums to a realistic level and to persuade businesses to adopt better health and safety regimes”, says Phil Bell, Commercial Liability Insurances Manager.

“Conditional fee agreements have given everyone more access to the courts, but have added hugely to the cost of claims.”

The classes particularly affected are employers liability and motor.