Financial Conduct Authority urges crackdown on fake injury claims

The Financial Conduct Authority wants its legal and medical counterparts to target firms helping those who fabricate or exaggerate claims. The City regulator said this week there is ‘growing evidence’ that some claimants are layering minor injury claims, contributing to higher premiums for motor insurance customers.

Analysis by the FCA found that the cost of bodily injury claims is increasing, accounting for 8% of the overall increase in total claims costs between 2019 and 2023. A reduction in the number of accidents resulting in bodily injury claims was more than offset by this larger rise in the average cost of claims.

The government established the motor insurance taskforce last October and the FCA says targeting this trend should be near the top of its priorities.

The organisation said the taskforce should engage with the Solicitors Regulation Authority and General Medical Council about whether to increase penalties for those engaging or assisting in claim fabrication or exaggeration, particularly any professionals associated with this activity.

Data from 12 insurers representing more than half the motor insurance market showed that bodily injury costs have increased from 2022 to 2024 by 7% to £2.9bn, while replacement vehicle costs have shot up by 48% to almost £700m.

The FCA also said claims costs have increased where additional parties are involved in the claims process, adding to the increasing cost of claims. This includes where insurers outsource elements of claims handling to accident management companies, claims management companies and credit repair and hire organisations, and receive referral fees for doing so.

Referral fees for insurers from CMCs and AMCs range from £30 to more than £1,000. Some firms receive alternative compensation, such as solicitor dividends or commercial arrangements that offset other service costs.

The Department for Transport launched its taskforce promising to get a fairer deal for UK drivers by rooting out factors that increase car insurance costs. Motor insurance premiums have grown by an average of 21% since June 2022, according to Financial Conduct Authority analysis – far higher than in comparable economies such as Germany, France, Spain and Italy.