Disproportionate legal fees involved in road accident claims are driving up the cost of motor insurance policies at an unprecedented rate, according to the Association of British Insurers. In April 2010 the price of car insurance premiums rose 6.3%, making insurance premiums the second fastest rising price category monitored by the Office for National Statistics.

According to the Association of British Insurers the spiralling cost of legal fees in accident claim cases is the principal factor in the ongoing rise, which is around 26% year on year at present. The organisation is careful to underline that it is not the compensation that is paid out to victims that is crippling the system, but the associated legal fees. They make an interesting point: government statistics show that in claims worth under £10,000, for every pound of compensation awarded, insurers pay 76 pence in legal fees. The figures show that the smaller the claim the more disproportionate such costs become.

As a result, it is believed that around 10% of the premium costs for each motorist is made up of money to cover spiralling legal costs.

In April changes to the way accident claims must be managed were brought into effect. Strict deadlines for every stage of the accident claim process have been introduced and a system of sharing information electronically between insurers and solicitors has been brought in. It is hoped that these changes can not only speed up the system but also greatly reduce the legal fees involved in making an accident claim, something that will benefit all motorists financially.