The government has announced plans to crack down on expensive whiplash claims, with the potential outcome being a reduction in insurance premiums totalling £1 billion a year.
The £1bn reduction would equate to saving of around £40 per premium and would be possible thanks to a proposed decrease in average payouts following a whiplash injury from £1850 to £425. Compensation would only be paid out if a medical report was provided as proof of injury. Currently, claims can be made without evidence.
Justice secretary Elizabeth Truss said: “For too long some have exploited a rampant compensation culture and seen whiplash claims an easy payday, driving up costs for millions of law-abiding motorists.
“These reforms will crack down on minor, exaggerated and fraudulent claims. Insurers have promised to put the cash saved back in the pockets of the country’s drivers.”
Certain insurers, such as Aviva and LV, have pledged to pass 100% of the savings associated with the changes onto motorists.
“One whiplash claim is paid out every 60 seconds and it is unacceptable that responsible motorists have to pick up the tab,” said sconomic secretary Simon Kirby.
“We are tackling the incentives that have created this compensation culture so all drivers can save money on their motor insurance policies.”
According to the latest AA British Insurance Premium Index report, the annual premium paid rose by 9% in the third quarter of 2016 compared to the same period in 2015. The average premium paid in the third quarter of 2016 was £440.