Drivers can expect yet more hikes in the cost of car cover after it was revealed that insurers are facing huge increases in the cost of dealing with accidents.
New figures from consultant, Towers Perrin show that the cost to providers of settling injury claims is now rising by 30 per cent a year.
This follows on from research earlier this year, carried out by Confused.com and EMB, which showed premiums had soared by 14 per cent in the 12 months to April as insurers passed on part of their increased costs to consumers.
Why are claim costs rising?
The price of car cover depends on the likelihood of claims being made, and the average cost of those claims.
What the insurance industry has experienced recently is both an increase in the number of claims, and a rise in the payouts per case.
One of the biggest reasons for this is a rise in the amount of fraud. According to the AA, some drivers have been guilty of inflating the value of claims, for example by exaggerating the extent of personal injuries, or making them up altogether.
Added to this is a new wave of organised car insurance fraud by criminal gangs, which stage crashes with the intention of claiming on innocent motorists’ policies.
The Association of British Insurers says that the total cost of all forms of insurance fraud runs at around £2 billion a year, and has been increasing as a result of the recession.
The outlook for premiums
So will a 30 per cent annual rise in the cost of injury claims result in a similar hike in premiums? Not necessarily.
Insurers say they are working hard to minimise the impact on their prices – after all, this is a very competitive market – as well as to deal with the problems at their source.
Carmel McCarthy at insurer More Than says: “Bodily injury claims are not something new, they have been a factor in the UK insurance market for a number of years. Along with other insurers we've seen an increase in the frequency of claims and also the number of claimants per vehicle.
“At More Than, we spotted this trend early and have taken action to minimise the impact through the development of a dedicated rehabilitation programme to help those injured get well quickly, and the implementation of new software which helps us detect fraudulent claims.
“While we never comment on future premiums, we also acted early in this area too and have been able to restrict increases to 6-7 per cent over the last three years.”
If you find that your premiums are rising, one way to combat this is to use an established price comparison site to shop for your car insurance.
A new study
As part of the crackdown on fraud, one claim-investigation firm is investing £112,000 in a University of Portsmouth study into how providers can establish when claimants are not telling the truth.
The two-year study is being carried out by Dr Sharon Leal, who is critical of firms which investigate customers purely on the basis of gut instinct or commonly accepted “signs” of lying, such as blinking a lot or not looking at a questioner directly.
Dr Leal says: “Contrary to popular belief, motivated liars do not fidget, avert their gaze or blink nervously. They are usually calm and have planned their lies down to the last detail. Also, many people do not see anything wrong with making a false claim and if they don't feel nervous or guilty, it follows that the techniques that rely on these factors will ultimately fail.”
The study aims to use laboratory conditions to establish exactly what marks out liars from those who are telling the truth.
Dr Leal adds: “There is a real need to use evidence-based methods that are scientifically proven to work to stop wasting insurance companies' time and money and to stop innocent people being treated as suspects while the guilty get away.”
