Crash payouts for UK drivers are 17 times higher than other nations

‘Everyone should pay a fair price’

HUGE compensation payouts for road accidents are causing insurance premiums to rocket, a report shows.

The RAC Foundation found that personal injury payments in Britain can be as much as 17 times higher than in other countries.

It also said the UK phenomenon of bogus whiplash claims, as well as tax rises, mean British motorists pay more for insurance than those on the continent.

Meeting the long-term care costs for those who genuinely suffer catastrophic injuries in road traffic accidents can result in payouts of about £10million in the UK. This is significantly higher than Germany (£6million) and France (£6million).

In Sweden, compensation can be as little as £600,000.

The RAC’s calculations were based on a hypothetical 30-year- old male quadriplegic with two dependent children and an unemployed partner.

In some countries, particularly in Scandinavia, the state rather than the insurance company shoulders more of the burden for paying for longterm care. This keeps premiums down for motorists.

The report said these differences were likely to increase following the Government’s controversial decision to change the way injury payouts are calculated.

Courts in the UK work out compensation based on loss of earnings and the cost of care.

But they also calculate how much payouts should be adjusted based on the likely long-term interest that victims would earn on the cash. Since 2001, it was thought that up to 2.5 per cent interest could be earned on compensation and this was taken into account when calculating payouts.

But in February this year then Lord Chancellor Liz Truss changed the discount rate, as it is known, to -0.75 per cent.

This much lower rate means insurers will have to pay out more on the assumption that victims will be losing money from their payouts every year.

Premiums are also expected to rise this summer because of the latest hike in insurance premium tax from 10 per cent to 12 per cent in June.

This will affect about 36 million general insurance policies, including car, home and private medical cover, with insurers paying for the tax rise by increasing premiums.

It means the levy will have doubled from 6 per cent in under two years, since former chancellor George Osborne signalled the raid on policyholders in the 2015 summer budget.

Analysis by comparison website Money-Supermarket showed the cost of the average motor insurance policy had jumped almost 20 per cent over two years from £474 to £562.

Younger drivers aged 17 to 19 now pay £1,322 on average.

Steve Gooding, director of the RAC Foundation, said: ‘The nation’s 38 million drivers are all too well aware of the high cost of insurance, and while direct comparisons with the rest of Europe are hard to make, all the signs are that we pay more for our insurance than our continental cousins.

‘Everyone should pay a fair price for insurance, but if people are priced out of the market, the danger is they choose to drive uninsured and that’s a risk to us all.’

Figures from the Association of British Insurers revealed insurance firms detected 125,000 dishonest claims worth £1.3billion last year.

Of these, some 69,000 bogus motor insurance claims worth £780million were detected.