Personal Finance: Drivers face injury bill

A new Bill looks set to add pounds 10 to motor premiums By Andrew Verit y

MOTOR INSURANCE premiums may have to rise by an extra pounds 10 per motorist because of Government plans to make insurers pay the NHS to treat road accident victims, unsurers are warning.

The Road Traffic Act (NHS) Charges Bill, to be introduced before the summer, is designed to make it easier for NHS Trusts to recoup from insurers the cost of treating victims. The bill was foreshadowed in the Queen's Speech on Tuesday.

Insurers attacked the bill, claiming it will force motorists to pay twice for the NHS, once through national insurance and again through motor insurance premiums.

Andy Homer, chief executive of Axa Insurance, said: "The aim of this bill is to shift the medical expenses incurred from motor accidents from the NHS to insurers, but in the end it will be the motorist who picks up the tab - as insurance premiums will have to increase.

"Motorists under the new ruling will, in effect, be paying for hospital charges twice."

According to NHS estimates, 106,300 people required treatment for serious injuries as a result of road traffic accidents last year. A further 411,700 were less seriously hurt. The cost of treating them was about pounds 150m, which was borne by the NHS.

The Association of British Insurers estimates that the pounds 150m translates into an approximate pounds 10 per motorist.

The pounds 10 rise will come on top of substantial rises in premiums over the past year - for separate reasons. Premiums have already jumped by 10 per cent over the past year.

The reason is that insurers, who have written unprofitable motor insurance for years under intense price competition, want to return their businesses to profitability.

Companies such as CGU, Royal & SunAlliance and GRE are finding it difficult to boost premiums on commercial business, where companies will simply take their business elsewhere. Motorists, however, are seen as relatively soft targets.

In January 1996, the average premium on a fully-comprehensive policy was pounds 334.64. Now that has jumped to pounds 431.67. The AA predicts that premiums will rise a further 10 per cent in the coming year - even without the extra cost of paying the NHS to treat accident victims.

Insurers claim another effect of premium increases will be to tempt more motorists to break the law by driving uninsured. Already, almost 10 per cent of the UK's 23 million drivers do not pay for insurance.

That, too, could rebound on premiums rates. About pounds 10 of every motor insurance premium goes to paying the costs of the Motor Insurers' Bureau, set up in the 1980s to compensate victims of accidents involving uninsured drivers. If the number of uninsured drivers rises, so will that pounds 10 payment.

Surprisingly, the power to claim medical treatment costs dates back to road traffic acts as early as the 1930s. NHS trusts are already empowered to demand money from motor insurers for medical costs up to pounds 3,000. But the practicalities of claiming have been mired in bureaucracy. The bill aims to streamline the procedures for trusts to recoup the cost of treatment, taking pounds 150m off the taxpayers bill for the NHS.

For pedestrians at least, this could be good news. For motorists, however, it is but the latest slap in the face.