Personal injury law firm Thompsons Solicitors says car insurers are profiteering by continuing to increase car insurance premiums even though the cost of providing it has fallen.

The cost of car insurance claims fell in 2015, for the fifth consecutive year. These costs are now 30% lower than in 2010, meaning insurers have saved £2.5 billion, according to Thompsons Solicitors.

Despite these plummeting costs car insurance premiums continue to rise. In the 12 months to July 2016 the average premium rose by 17.2% or £84 to £485, the firm added.

“This latest information that has been sat on by the ABI completes a picture they would rather not have out there – of a booming industry with healthy profits and cash reserves paying out huge dividends,” says Tom Jones, head of policy at Thompsons Solicitors.

“This isn’t a sector buckling under the weight of ‘fraud’ as they would want the British public to believe.”

Insurers vs lawyers

It marks the latest salvo in an escalating battle between insurers and solicitors, with both sides keen to blame rising premiums on the other.

The Association of British Insurers (ABI) industry body argues that premiums are rising due to a fraud ‘crisis’ in the car insurance industry. 

However, Thompson Solicitors believes that the effect of fraud is being exaggerated and used as an excuse to increase premiums in order to boost profits.

“If there is fraud it should of course be tackled but the issue is being cynically manipulated. Fraud is being repeatedly used as a battering ram for reform that would actually mean only more profit for insurers,” says Jones.

The ABI is asking the government to reform the personal injury compensation system in order to “stem frivolous and exaggerated personal injury claims” that it says are costing motorists almost £3 million a day.

There are also calls from the insurance industry for the government to tackle insurance fraud with the ABI saying that 70,000 fraudulent car insurance claims in 2015 were detected and stopped.

Thompson Solicitors disputes the extent of the insurance fraud crisis.

“The insurers are taking the British public for fools – they haven’t defined fraud, they haven’t provided any independent evidence that it actually exists at the levels they claim and they aren’t reporting it to their shareholders as a ‘material risk,’” says Jones.

“In our view fraud is being cynically exaggerated to attack the rights of honest motorists and to justify premium increases.

"It’s high time the insurance industry stopped their manufactured hysteria about fraud and concentrated on providing greater transparency so consumers can see if the ever growing premiums are justified.”

[Related story: No-claims bonus confusion 'costing motorists a fortune']

What the industry wants government to do

Earlier this week, the ABI set out five ways it wants the government to help cut car insurance premiums.

The suggestions include increased training for young drivers, safer cars, a freeze on Insurance Premium Tax, reforms to stop ‘frivolous’ personal injury claims and taking steps to tackle insurance fraud.

“Every motorist wants competitively priced insurance that meets their needs,” says James Dalton, the ABI’s Director of General Insurance Policy.

“Consumers benefit from a very competitive insurance market, but insurers are facing the perfect storm of rising costs from personal injury claims, repair bills and Insurance Premium Tax.”

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