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Daily Insurance Industry News
Friday 27th of April 2018
October 28, 2010

Personal injury legal fees add £40 to motor premiums

by Gill Montia

Story link: Personal injury legal fees add £40 to motor premiums

The impact on Britain’s motorists of legal costs in personal injury claims following a road accident has been revealed by the Association of British Insurers (ABI).

Lawyers fees now add an extra £40 a year to the average motor insurance premium, according to the ABI’s analysis of over 50,000 low-value road accident personal injury claims.

The research shows that settling the average injury claim of £2,430 costs an extra £2,100 in legal fees, or put another way, for every £1 insurers pay in compensation, an extra 87 pence is now paid out in legal costs on claims under £5,000.

The ABI estimates that 10% of every motor insurance premium in the UK is now going to the legal profession, with consumers paying £2.7 million a day through their premiums.

The Association’s director of general insurance and health, Nick Starling, says: “A compensation system that can deliver £2,000 of compensation at a cost of as much as £5,000 is dysfunctional.”

He adds: “Excessive legal costs are a symptom of a civil litigation system that is broken … the activities of some claims management companies in racking up high legal costs adds to the cost pressures that end up being paid for by motorists.”

Earlier this week, Justice Secretary, Ken Clarke, indicated that lawyers in England and Wales may be prevented from raising the bar on their fees in no-win-no-fee personal injury cases.

Lawyers working on a no-win-no-fee basis are currently able to double their fees in cases they win.

However, speaking on BBC Radio 4’s Law in Action programme, the minister revealed that the Government is considering a system similar to that in the US, whereby some legal fees are recovered from damages awarded to the plaintiff.

 

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