Third party claims cost industry £400m

Third party insurance (TPI) claims climbed 6% last year, costing the industry £400m, a new report has revealed.

The Institute and Faculty of Actuaries report found that TPI claims costs increased 19% in 2011.

But despite the rise in claims, the study found that the average UK motor insurance premium fell 7.1% in the past 12 months.

The report also revealed a 20% drop in accidents involving injuries since 2006, according to Police data.

The Faculty of Actuaries’ own research, however, showed a 40% increase in third party claims.

The average small third party claim was £8,400, continuing a trend from 2005. Most of the claims were for whiplash.

Accidents resulting in third party claims dropped 11%.

Birmingham was Britain’s claims hotspot, with 11 out of the 20 top post codes, followed by Manchester and Liverpool, corresponding with the locations of claims management companies (CMCs).

Despite a 5% decline in the number of authorised CMCs, the companies increased their income by 21% to £455m in 2011.

Institute and Faculty of Actuaries UK third party motor and PPO claims working parties chairman David Brown said: “All of the updated data that we have collated supports the conclusion that claims management companies have had a marked effect on the number of small injury claims.

“This increase in claims has cost the insurance industry what we estimate to be £400m. Despite this, the average cost of a UK motor insurance policy is decreasing.

“This is good news for the consumer, but it does raise the question of how sustainable this is for insurers.”