Whiplash claims have sharply increased at a time when the average premiums for comprehensive car insurance cover is up by 8.7% in the year to September 2008, to reach Ј486.45.
Insurers are concerned that personal injury claims and fraud are costing them more than they are claiming back in premiums. There is also more bad news for car insurers after leading car insurance provider the AA announced it will up its premiums by 10-11% in 2009.
It is also thought that other insurance providers may follow suit and increase premiums by up to 20% in an attempt to narrow the gap between the amount they are paying out and the amount they are pulling back in premiums.
Reports suggest that a 22% increase in the cost to insurers from personal injury claims was recorded in 2008 with Ј66 being added to the cost of each driver's annual premium as a result.
Many car insurance providers are worried about the growing number of claims for whiplash despite the fact that the injury is largely avoidable. Statistics show that claims have increased by 25% over the past five years, at a cost of Ј1.9 billion to insurers.
Organised crime and rise in fake claims Insurers are also wary of fraudsters after their cost of claims increased by 17% in the past year and adding Ј30 to the average premium. It is thought that for every Ј105 insurers pay out in claims, they take in just Ј100 in premiums.
This shortfall was initially not seen as a problem because car insurance premiums were invested immediately on the share market. However, car insurers are also now less able to increase profits by investing in stocks and shares because the credit crunch has forced a sharp decline in value across the board.
Since 2007, there has been an 80% increase in the number of fake household and vehicle claims. Many of these claims are thought to be made by middle-class families struggling to pay their bills.
However, one of the major problems facing insurers when it comes to identifying fraudulent whiplash claims is organised crime. Earlier reports suggest that criminal gangs will stage a car accident by cutting someone up and then slamming their brakes on so the person goes drives into the back of them.
They then claim for various medical bills, claim for non-existent passengers who they allege suffered whiplash and loss of earnings among others.
'Red' ratings signal poor whiplash protection Last year Euro NCAP, the motoring industry's independent safety ratings provider, revealed that only five out of 25 front seats of passenger cars had received a good or 'green' rating when tested for whiplash protection.
The findings show 'that most manufacturers still have a long way to go in improving seat design that will protect consumers from whiplash injury because they were 'concerned by the surprisingly low number of seats receiving a good result' from cars newly available on the market.
Eight seats of the same 25 cars were rated as poor or 'red', meaning that the seat occupant has a significantly higher risk of developing a long-term injury in the case of a low speed rear end collision, according to the test.
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