The government’s personal injury reforms will boost insurers’ profits by up to £700m a year, an economics consultancy has predicted ahead of today’s second reading of the Prisons and Courts Bill.

Capital Economics (CE) also said there were reasons other than fraud which led to rising insurance premiums, and that the argument motor accident rates have fallen while claims have risen may be misleading.

The report was commissioned by Access to Justice, but CE made clear that its work was independent. It also came as the justice select committee announced an inquiry into the reforms.

“The reality is that the proposed reforms would deliver a material boost to insurers’ profits,” CE said, describing as “implausibly high” the Ministry of Justice’s (MoJ) projection that insurers would pass on 85% of the £1.3bn savings generated as lower premiums for motorists.

Even then the MoJ has admitted that this delivered an extra £200m to insurers, but CE said that on “more realistic pass-through rate assumptions, insurers’ profits will increase by between £400m and £670m”, plus another £66m it estimated insurers would save through reduced staffing.

Source: http://www.legalfutures.co.uk/latest-news/government-pi-reforms-will-hand-insurers-windfall-700m-say-economists