£1bn up for grabs as insurers vow to pass on whiplash reform savings

Government measures to drive out fraudulent whiplash claims could see motorists better off as insurers pledge to pass on up to £1bn a year in savings.

After the Treasury revealed plans late last year to 'bring forward reforms to the compensation culture around minor motor accident injuries', a number of insurance companies have since committed to passing on 100 per cent of savings to their customers, meaning premiums could fall by around £50 a year. Insurers have promised to handing over savings to drivers as 'quickly as possible'.

The agreement between ministers and the insurance industry followed a roundtable meeting to discuss the chancellor's Autumn Statement, which announced plans to scrap the right to compensation for minor whiplash injuries and raise the upper limit for personal injury claims from £1,000 to £5,000.

Justice Minister Lord Faulks said: 'We are determined to crack down on the culture of fraud and exaggerated claims in the motor insurance industry, which means car owners are forced to pay higher premiums to cover the false claims of others.

'This culture is boosted by an industry that encourages exaggerated claims through cold calling and it is right that we tackle this. Insurers back these much-needed reforms and have committed to handing over savings to motorists quickly.'

Whiplash 'gravy train'

James Dalton, director of general insurance at the Association of British Insurers (ABI), said the government reforms were a significant breakthrough in tackling the UK's compensation culture.

'Reforms to the small claims track limit and the end to cash compensation for low value injuries will help to bring down unnecessary costs in the motor insurance market and honest motorists should be the beneficiaries,' he commented.

Also welcoming the reforms was Mark Wilson, chief executive Officer of Aviva plc, who described them as a 'bold' and a 'necessary step' by government on behalf of 'honest people'.

'It is all about standing up for the consumer against the fraudsters,' he said. 'Let me be clear, Aviva will pass on 100 per cent of the savings from this government initiative to our customers, reducing customers' average premiums by around £40-£50 when it is implemented.'

Wilson continued: 'The government is putting the brakes on the whiplash gravy train. It is great news for consumers. Sadly, law abiding motor customers have paid for the UK's dysfunctional and fraudulent motor claims system through inflated motor premiums.'

Failed promises

The government states that whiplash claims cost the country £2bn a year and adds £90 to the average motor insurance policy. Previous reforms are said to have contributed to a fall in premiums of over 10 per cent since 2012.

However, speaking last year, the president of the Association of Personal Injury Lawyers (APIL), Jonathan Wheeler, described Osborne's plans as 'callous' and said that insurers had failed to live up to previous promises to pass savings.

'Since 2012 the portal has been extended, medical reporting for whiplash claims has been completely overhauled, sharing of fraud data has been introduced, and solicitors' fees have been slashed,' he remarked.

'Government figures show whiplash claims have fallen by more than a third in the past four years. Yet still insurance premiums have increased.'