Insurance customers ‘pay price for huge legal fees’

This legal fee bill is the equivalent of £1,666 added to motor insurance premiums every minute, said the Association of British Insurers (ABI).

It added that legal costs often exceeded compensation payments made to those who are hurt.

The ABI said:

One insurer’s average claimant legal costs in 2010 represented 142 per cent of the sums received by injured victims;

A recently reported compensation claim for a work-related injury for £12,750 settled out of court attracted legal costs of £74,000;

A legal bill of £37,250 was run up in settling a claim for £15,000 in respect of injuries sustained by a woman who fell into the moat at a castle;

Between 2004 and 2011 there has been a five per cent rise in NHS legal costs, but a 130 per cent increase in claimant legal costs. In the financial year 2010/11 the NHS paid out £257m in lawyers’ fees following claims.

James Dalton, the ABI’s head of motor and liability insurance, said: “Since its introduction in 2010 the fast-track process for settling lower-value personal injury claims has led to significantly quicker compensation payouts. But the fixed costs in the process remain too high.

“The UK’s compensation system is riddled with disproport- ionate and excessive legal costs, often exceeding compensation awards.

“This means higher insurance costs for motorists and businesses and a heavy cost burden on local authorities and the NHS.”

He went on: “The Government must press ahead with the much-needed reform of our dysfunctional compensation system, which, together with the ban on the selling on of personal details of potential claimants, will enable solicitors’ fixed fees to be reduced to more realistic levels.

“Lower legal costs will help bring down the cost of motor insurance for all drivers.”

Increasing numbers of people making personal injury claims following crashes has been blamed for a recent surge in the cost of motor insurance.