Car insurance premiums are up by an average of 40% this year. Young drivers are being penalised and experienced motorists, who've never made a claim, are finding themselves priced off the road.
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(Do you have something to say about this story? Tell us what you think by emailing us here. Don't forget to include 'Insurance' in the subject line. Watchdog will publish a selection of viewers' comments underneath each story, both throughout and after the programme is on air. Please remember to include your name as you would like to see it published).
This is despite the number of traffic accidents and car thefts falling. So, who's to blame?
Accidents can happen, but the number of crashes resulting in injury has gone down by 30% over the past 15 years. Safer roads should mean reduced insurance claims and lower premiums, but a huge number of Watchdog viewers have got in touch to tell us that their premiums have shot up -significantly.
Karen West saw her renewal double in price to over £600, Christian Bursche saw a 70% increase in his car insurance quote and Dee Burton was quoted an incredible £2200 to insure her car.
Like most drivers those motorists winced, then paid out for a new premium, but others haven't. So some are now driving around uninsured, committing a criminal offence and hitting the rest of us in the pocket. It's a vicious circle.
Higher premiums can lead to more uninsured drivers. And if the insurance companies are losing out, they'll claw the money back through even higher premiums.
But there's a second factor that's led to our bills rising. A factor that gets bigger every year - personal injury claims made by those involved in collisions. They've gone up by a staggering 70% over the past decade. Now that's bad news for the insurance industry, because for every pound it pays in compensation it has to pay an extra eighty six pence in legal fees. And that's bad news for you and me too because it can only recover that money by increasing our premiums.
The insurance companies are upfront about this. They regularly blame the rise in personal injury claims for increasing their charges, but there's something they don't tell you. The insurance companies themselves are locked in a money merry-go-round that encourages more and more personal injury claims.
This is how it works. If you're injured in an accident your insurance provider can pass your details to a personal injury lawyer, or a claims management company who will act as a middle-man and find a solicitor for you. In return, lawyers and claims management companies pay the insurer a referral fee, which can be as much as £900.
If your claim is successful, the lawyer demands compensation for your injury from a third party insurer - as well as a bill to cover his own hefty fees. Nice little earner for him.
The third party insurer may have lost out this time, but meanwhile, he'll be receiving referral fees from other lawyers who are demanding payments from other insurance companies for other accidents.
Round and round it goes, and - in the middle - the claims management industry, raking in fees. Fees that have to be recovered through increased premiums.
Most claims management companies are reputable, providing valuable advice on where to get the right lawyer and proper compensation for a genuine injury, but not all. Some use aggressive marketing techniques - pressuring people into making a claim when they haven't been injured at all.
We've spoken to Watchdog viewers that have been targeted by these companies. Sherron Warwick hasn't been in accident for over 6 years and wasn't injured, but has been receiving calls and texts encouraging her to claim. Malcolm Wood's car was hit whilst no-one was it, but he has also been contacted by claims management companies offering him thousands to claim. Elizabeth Ace was involved in a low impact collision 3 years ago and wasn't injured, but she's told us that claims management companies have been pushing her to make a claim, using aggressive tactics along the way.
Aggressive marketing isn't illegal, but it can encourage people to make fraudulent claims and its part of a growing problem.
Insurance Expert Graeme Trudgill explains: "We've seen a massive increase in the number of personal injury claims made on the insurance industry. Over 400,000 whiplash claims a year, it's actually a tripling in the amount of claims that we've seen for bodily injury. So what we're getting is claims management companies now, they're texting people, they're using aggressive marketing techniques to try to encourage people to make a claim. Their advertising's not illegal, but if you actually go ahead and claim when you weren't injured then that almost definitely is illegal."
With so much money to be made, fraud investigators have also witnessed organised criminal gangs moving in to take advantage of the system.
Graham continues: "We're seeing staged accidents now, people doing an emergency stop in front of an innocent motorist and then claiming for things like their injuries, their loss of earnings, hire cars, repair costs. The cost is over £900 million a year for motor insurance fraud which adds £40 to every motorist's policy."
Insurance fraud is a key factor in the rising cost of our premiums, but it's something that can be tackled. The Bedfordshire Police and the Insurance Fraud Bureau recently cracked one of the UK's biggest insurance fraud rings. Thirty seven gang members, involved in 180 fraudulent crashes, worth over five million pounds in insurance payouts. Yesterday, the last 3 men to be convicted were sentenced to 11 years behind bars.
So, uninsured drivers, more personal injury claims and unscrupulous gangs guilty of fraud. They all add up to a perfect storm for innocent motorists and contribute to insurance bills that are spiraling out of control...
Response from the Association of Personal Injury Lawyers:
Obviously there is no place for fraudulent claims in the legal system and the Association of Personal Injury Lawyers has been actively liaising with those directly involved in this issue, including the Insurance Fraud Bureau: if lawyers have more intelligence about possible fraud at the outset of cases, they can work even harder to stop it at source. It is equally important, though, to remember that people who are genuinely injured, and whose lives have been affected by needless injury, are entitled to claim compensation and they should be allowed to do so.
It is difficult to see how referral fees paid to insurance companies by solicitors representing injured people can have any impact on insurance premiums or on claims, because the fees are paid out of the solicitors' own accounts and are not passed on to the insurer. For consumer protection purposes, however, we do believe that the use of referral fees must be completely transparent so that injured people understand exactly how their cases are being handled.
There are also other reasons why insurance premiums may have increased. The motor insurance market has made a loss for years, for example, and the increase in premiums has been described recently to the transport select committee as a 'market correction'. There has also been a growing practice in recent years of the insurer of the person who caused the injury to contact the injured person direct to offer compensation, before the injured party has consulted an independent solicitor. This can save the defendant's insurer from having to pay the injured person's legal costs but may be increasing the number of claims. These are major consumer protection issues and we have been campaigning for transparency around the use of referral fees, and proper regulation of insurers' behavior for many years.
David Bott
President, APIL
Response from ABI
End referral fees now says ABI as motor insurance premiums show record rise
Unless action is taken to curb the rising cost of settling personal injury claims, motor insurance premiums will continue to rise, the ABI warned today. This stark warning comes as figures released today (13 April) by the AA1 show that the average motor insurance premium has risen 40% over the last year.
Nick Starling, the ABI's Director of General Insurance and Health, said:
"Enough is enough. Putting the brake on ambulance-chasing lawyers and claims management firms cannot come a moment too soon. Motorists have rightly had enough of paying for excessive legal costs, which add an extra 10% to the cost of motor insurance. It cannot be right that for every £1 motor insurers pay out in compensation, an extra 87 pence is paid out in legal costs.
"The Government's recently announced plans to reform civil litigation will go a long way to cutting out unnecessary and disproportionate legal costs and should lead to cheaper motor insurance in the future. What we now need is a ban of referral fees - where details of potential personal injury claimants are sold on to solicitors and claims management firms.
"It is vital that the Government acts to outlaw referral fees, as part of its wide-ranging reforms to civil litigation".
Watchdog Viewer Responses:
It is disgusting what insurance quotes are nowadays with a system that doesn't work and is in dire need of a change. My insurance quote this year was for 3000 pounds, yes you heard right three zeros for a standard car with no convictions and no claims etc. I could purchase another car at this rate!
Farina
I had a car accident 3 years ago, nothing major just a driver bumped into me at a roundabout. Im still getting calls and txts offering me almost £4000.00 in injury compensation. I let the person explain it all to me and then politely say no thanks I wasn't injured, and every time they say they will take me of their list. Ive been told this now over 10 times but still get calls.
Keith
Not all Insurance Companies make referrals to Accident Management Companies. Insurance Brokers make them and Vehicle Repairers when an individual requests a repair estimate.
CN
I'm a london taxi driver over a year ago i had a none fault accident, i've had 4 or 5 phone calls and a number of texts to say that i could get around £3000.00 pounds if i was to make a personal accident claim, even though i've said every time that the other driver just rolled back at less than 3 mph and just damaged my bumper, but a month dosn't go by without a phone call or text.
Paul Fashola
i have been driving since 1992 and am nearly 40 years of age ,i have 9 years plus no claims bonus protected, my insurance was 600 pounds last year,this year to renew in may 11 they want 1632.00 pounds i cannot belive how much they are asking this is over double compaired to last years,i can now see why there is so many people that drive round with no insurance .
Mr A Garratt, West Midlands
Surprised by your car insurance rise?
In order to see this content you need to have both Javascript enabled and Flash installed. Visit BBC Webwise for full instructions. If you're reading via RSS, you'll need to visit the blog to access this content.
</p>
(Do you have something to say about this story? Tell us what you think by emailing us here. Don't forget to include 'Insurance' in the subject line. Watchdog will publish a selection of viewers' comments underneath each story, both throughout and after the programme is on air. Please remember to include your name as you would like to see it published).
This is despite the number of traffic accidents and car thefts falling. So, who's to blame?
Accidents can happen, but the number of crashes resulting in injury has gone down by 30% over the past 15 years. Safer roads should mean reduced insurance claims and lower premiums, but a huge number of Watchdog viewers have got in touch to tell us that their premiums have shot up -significantly.
Karen West saw her renewal double in price to over £600, Christian Bursche saw a 70% increase in his car insurance quote and Dee Burton was quoted an incredible £2200 to insure her car.
Like most drivers those motorists winced, then paid out for a new premium, but others haven't. So some are now driving around uninsured, committing a criminal offence and hitting the rest of us in the pocket. It's a vicious circle.
Higher premiums can lead to more uninsured drivers. And if the insurance companies are losing out, they'll claw the money back through even higher premiums.
But there's a second factor that's led to our bills rising. A factor that gets bigger every year - personal injury claims made by those involved in collisions. They've gone up by a staggering 70% over the past decade. Now that's bad news for the insurance industry, because for every pound it pays in compensation it has to pay an extra eighty six pence in legal fees. And that's bad news for you and me too because it can only recover that money by increasing our premiums.
The insurance companies are upfront about this. They regularly blame the rise in personal injury claims for increasing their charges, but there's something they don't tell you. The insurance companies themselves are locked in a money merry-go-round that encourages more and more personal injury claims.
This is how it works. If you're injured in an accident your insurance provider can pass your details to a personal injury lawyer, or a claims management company who will act as a middle-man and find a solicitor for you. In return, lawyers and claims management companies pay the insurer a referral fee, which can be as much as £900.
If your claim is successful, the lawyer demands compensation for your injury from a third party insurer - as well as a bill to cover his own hefty fees. Nice little earner for him.
The third party insurer may have lost out this time, but meanwhile, he'll be receiving referral fees from other lawyers who are demanding payments from other insurance companies for other accidents.
Round and round it goes, and - in the middle - the claims management industry, raking in fees. Fees that have to be recovered through increased premiums.
Most claims management companies are reputable, providing valuable advice on where to get the right lawyer and proper compensation for a genuine injury, but not all. Some use aggressive marketing techniques - pressuring people into making a claim when they haven't been injured at all.
We've spoken to Watchdog viewers that have been targeted by these companies. Sherron Warwick hasn't been in accident for over 6 years and wasn't injured, but has been receiving calls and texts encouraging her to claim. Malcolm Wood's car was hit whilst no-one was it, but he has also been contacted by claims management companies offering him thousands to claim. Elizabeth Ace was involved in a low impact collision 3 years ago and wasn't injured, but she's told us that claims management companies have been pushing her to make a claim, using aggressive tactics along the way.
Aggressive marketing isn't illegal, but it can encourage people to make fraudulent claims and its part of a growing problem.
Insurance Expert Graeme Trudgill explains: "We've seen a massive increase in the number of personal injury claims made on the insurance industry. Over 400,000 whiplash claims a year, it's actually a tripling in the amount of claims that we've seen for bodily injury. So what we're getting is claims management companies now, they're texting people, they're using aggressive marketing techniques to try to encourage people to make a claim. Their advertising's not illegal, but if you actually go ahead and claim when you weren't injured then that almost definitely is illegal."
With so much money to be made, fraud investigators have also witnessed organised criminal gangs moving in to take advantage of the system.
Graham continues: "We're seeing staged accidents now, people doing an emergency stop in front of an innocent motorist and then claiming for things like their injuries, their loss of earnings, hire cars, repair costs. The cost is over £900 million a year for motor insurance fraud which adds £40 to every motorist's policy."
Insurance fraud is a key factor in the rising cost of our premiums, but it's something that can be tackled. The Bedfordshire Police and the Insurance Fraud Bureau recently cracked one of the UK's biggest insurance fraud rings. Thirty seven gang members, involved in 180 fraudulent crashes, worth over five million pounds in insurance payouts. Yesterday, the last 3 men to be convicted were sentenced to 11 years behind bars.
So, uninsured drivers, more personal injury claims and unscrupulous gangs guilty of fraud. They all add up to a perfect storm for innocent motorists and contribute to insurance bills that are spiraling out of control...
Response from the Association of Personal Injury Lawyers:
Obviously there is no place for fraudulent claims in the legal system and the Association of Personal Injury Lawyers has been actively liaising with those directly involved in this issue, including the Insurance Fraud Bureau: if lawyers have more intelligence about possible fraud at the outset of cases, they can work even harder to stop it at source. It is equally important, though, to remember that people who are genuinely injured, and whose lives have been affected by needless injury, are entitled to claim compensation and they should be allowed to do so.
It is difficult to see how referral fees paid to insurance companies by solicitors representing injured people can have any impact on insurance premiums or on claims, because the fees are paid out of the solicitors' own accounts and are not passed on to the insurer. For consumer protection purposes, however, we do believe that the use of referral fees must be completely transparent so that injured people understand exactly how their cases are being handled.
There are also other reasons why insurance premiums may have increased. The motor insurance market has made a loss for years, for example, and the increase in premiums has been described recently to the transport select committee as a 'market correction'. There has also been a growing practice in recent years of the insurer of the person who caused the injury to contact the injured person direct to offer compensation, before the injured party has consulted an independent solicitor. This can save the defendant's insurer from having to pay the injured person's legal costs but may be increasing the number of claims. These are major consumer protection issues and we have been campaigning for transparency around the use of referral fees, and proper regulation of insurers' behavior for many years.
David Bott
President, APIL
Response from ABI
End referral fees now says ABI as motor insurance premiums show record rise
Unless action is taken to curb the rising cost of settling personal injury claims, motor insurance premiums will continue to rise, the ABI warned today. This stark warning comes as figures released today (13 April) by the AA1 show that the average motor insurance premium has risen 40% over the last year.
Nick Starling, the ABI's Director of General Insurance and Health, said:
"Enough is enough. Putting the brake on ambulance-chasing lawyers and claims management firms cannot come a moment too soon. Motorists have rightly had enough of paying for excessive legal costs, which add an extra 10% to the cost of motor insurance. It cannot be right that for every £1 motor insurers pay out in compensation, an extra 87 pence is paid out in legal costs.
"The Government's recently announced plans to reform civil litigation will go a long way to cutting out unnecessary and disproportionate legal costs and should lead to cheaper motor insurance in the future. What we now need is a ban of referral fees - where details of potential personal injury claimants are sold on to solicitors and claims management firms.
"It is vital that the Government acts to outlaw referral fees, as part of its wide-ranging reforms to civil litigation".
Watchdog Viewer Responses:
It is disgusting what insurance quotes are nowadays with a system that doesn't work and is in dire need of a change. My insurance quote this year was for 3000 pounds, yes you heard right three zeros for a standard car with no convictions and no claims etc. I could purchase another car at this rate!
Farina
I had a car accident 3 years ago, nothing major just a driver bumped into me at a roundabout. Im still getting calls and txts offering me almost £4000.00 in injury compensation. I let the person explain it all to me and then politely say no thanks I wasn't injured, and every time they say they will take me of their list. Ive been told this now over 10 times but still get calls.
Keith
Not all Insurance Companies make referrals to Accident Management Companies. Insurance Brokers make them and Vehicle Repairers when an individual requests a repair estimate.
CN
I'm a london taxi driver over a year ago i had a none fault accident, i've had 4 or 5 phone calls and a number of texts to say that i could get around £3000.00 pounds if i was to make a personal accident claim, even though i've said every time that the other driver just rolled back at less than 3 mph and just damaged my bumper, but a month dosn't go by without a phone call or text.
Paul Fashola
i have been driving since 1992 and am nearly 40 years of age ,i have 9 years plus no claims bonus protected, my insurance was 600 pounds last year,this year to renew in may 11 they want 1632.00 pounds i cannot belive how much they are asking this is over double compaired to last years,i can now see why there is so many people that drive round with no insurance .
Mr A Garratt, West Midlands
Surprised by your car insurance rise?