Injury lawyers 'cost billions'

13 December 2005

Proposals could slash premiums
ABI to resolve claims with arbitration
Pay-out ceiling to be introduced

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Car insurance premiums could be slashed if people making personal injury claims didn’t have to use lawyers.

The Association of British Insurers (ABI) says freeing people from the need to use lawyers for claims of up to £25,000 would save billions of pounds a year.

Currently, the ABI says just seven pence of every pound awarded in claims actually ends up with victims. Legal costs account for most of that 93p, which adds up to £2 billion a year.

The pay-out ceiling would cover 95% of all claims and use a set tariff of payments to speed up the claims process from today’s typical three-year timescale to just six months.

The ABI says the system would use independent arbitration instead of today's adversarial system involving lawyers, and also proposes that insurers should be given a three-month time limit to reach a decision on a claim.

Director general of the ABI Stephen Haddrill said: 'Our proposals are a blueprint for a much-needed reform of the personal injury compensation system. Too many people are waiting far too long to get a fair pay-out.’

However, the Association of Personal Injury Lawyers says victims could receive less money under the proposals, pointing out that initial compensation sums currently offered by insurers are, on average, half of the final amounts secured by lawyers.