The RAC Foundation has said that PI compensation levels for road traffic accidents in the UK are 17 times higher than some other European countries.
The transport policy and research organisation has argued that this is driving up the cost of insurance for young drivers in the UK in particular.
Meeting the long-term care costs of some of those catastrophically injured in road accidents can result in compensation payments of around £10 million in the UK, significantly ahead of Germany (£6 million) and France (£6 million).
In Sweden, compensation might be as little as £0.6 million.
The differences are highlighted in a European-wide comparison of insurance markets for the RAC Foundation by Nick Starling, the former director of general insurance at the Association of British Insurers.
The study argues that the national differences in levels of compensation are likely to increase now that the Government has changed the discount rate. It also says that the largest factor in the size of a claim is what proportion of the medical and care costs are met by the state, and how much is the responsibility of the injured party and their insurer.
It is likely to result in insurers having to pay much larger up-front lump sums to fund ongoing care for those most badly hurt on the roads.
The report says: “The UK Government’s own calculations for a young quadriplegic requiring £100,000 a year in care costs is that the lump sum award will increase from £5-6 million to £9 million – up around 60%. The UK Prudential Regulation Authority has estimated that overall claims costs could rise by £2 billion annually.”
Other reasons why the cost of UK motor insurance tends to be higher than in the rest of Europe include the fact that other markets are generally more regulated with limitations on how much premiums can rise and fall.
The RAC Foundation has also pointed out that UK insurers assess risk primarily on the age and experience of drivers, before taking other things into account, whereas in many other countries the type of vehicle is the starting point. In addition, the age that you can start driving in most European countries is 18, rather than 17, as in the UK. Third-party insurance is also common across continental Europe and is usually cheaper than comprehensive cover which will pay out in more scenarios.