Recent estimates have stated that each time £1 gets paid out in compensation for personal injury claims, the legal profession gets 40p of it. Amazingly, the legal costs have increased so extravagantly that the British legal profession now receive £2 billion a year through the lengthy legal battles relating to personal injury claims.

Personal injury cases tend to amble very slowly through the courts, as a result they are invariably extremely costly. Consequently, approximately £200 of the average car insurance premium is earmarked for a potential personal injury claim going to court. If these legal costs could be reduced, then naturally the car insurance companies would be able to reduce their premiums.

With this aim in mind, the Association of British Insurers (ABI) recently made moves to take personal injury claims out of the courts and into an independent arbitration system. This has already been done in Ireland in 2004 and proved to be very successful, reducing legal costs by 75%.

Currently in the UK, each personal injury claim is decided on its individual merit in court. The ABI has proposed that reference payments be set for each type of injury, for example, in Ireland, a back injury that recovers within one year is allocated the equivalent of £11,000. A neck whiplash injury however, which is resolved within a year, would receive an automatic payout of £9,400.

Ian Crowder of the AA said: "These new proposals will aim to take personal injury claims out of court and take lawyers out of the loop altogether, thereby cutting costs significantly."

He pointed out: "There's no doubt that the soaring costs of personal injury claims has been a significant contributor to insurance premium inflation. If they could be brought under control, premiums could be cut."

The British Association of Personal Injury Lawyers has expressed some dissatisfaction about these proposals. They think that if personal injury claims were taken away from the courts, then the injured would be at the mercy of the car insurance companies. They also stated that their own research revealed that initial offers by insurers were, on average, 50% of the final compensation agreed and that two thirds of defendants denied liability at the outset.

Fortunately, objections made by the legal profession are not supported by what has happened in Ireland since the changes were made. Compensation values in Ireland have remained at similar levels to pre-arbitration, but people receive their money three times quicker and legal costs have been reduced by 75%.

Let's hope that these changes are made soon, and car insurance premiums take a swift and significant fall to reflect them.

About the author:

Michael works as the content editor for One Stop Car Insurance Shop who offer cheap car insurance and car insurance quotes all online. http://www.one-stop-car-insurance-shop.co.uk