(March 16, 2011) CHESTER, England (PRNewswire) — The car insurance industry in the UK is coming under fire after a report from the Transport Select Committee attacked the relationship between insurance firms and personal injury lawyers.

The report, which was presented by leading actuarial consultancy EMB, described the "merry-go-round" of payments that occurs after car crashes, with lawyers allegedly paying insurers and even garages for information about people involved in car accidents.

The referral fees were cited as a major factor in the rapidly increasing cost of insurance premiums, which is expected to rise by an average of 40 per cent this year.

The report said: "In our view, the biggest single factor driving price increases is the burgeoning cost of bodily injury claims.

"We estimate that 20 years ago bodily injury claims accounted for around 20 per cent of UK motor insurance claims costs. In 2010 we now estimate that proportion to be 50 per cent."

Steve Sweeney, a car insurance expert at moneysupermarket.com said: "Our research shows that car insurance premiums have increased year-on-year by a massive 31 per cent and this is set to continue to rise.

"Factors that are causing this include an increase in personal injury claims, fraud and the continued problem of uninsured drivers which are pushing up premium prices. In fact, we carried out some research in August last year which found that 15 per cent of motorists under the age of 35 would consider staging a motor accident to claim on their insurance.

"Organized motor fraud not only costs the insurance industry, but risks the safety of innocent drivers, passengers and pedestrians. In addition, fraudulent claims cause insurers to increase premiums for honest motorists as they try to recuperate their losses, making it even harder for cash-strapped motorists to keep their cars on the road."

The rising cost of insurance is a bitter pill to swallow for the UK's drivers, who have made the country's roads safer over the last 20 years. Figures from the Department of Transport show that the number of people killed or injured on Britain's roads has dropped from 341,592 in 1989 to 222,146 in 2009.

Duncan Anderson, a fellow of the Institute and Faculty of Actuaries, pointed a finger at Accident Management Companies, whose role is to provide drivers involved in accidents with vehicle repair services, replacement car higher and lawyers if necessary.

He said: "We have seen a correlation between claim frequency betwee n these companies and bodily injury claims," said Duncan Anderson, a fellow of the Institute.

"The mystery is that the number of accidents is going down, but more people are claiming that they have been injured.

"There is anecdotal evidence of people taking a car in for a repair and getting a text message as they leave the garage asking them if they were in an accident."

The "no-win, no-fee" promises made by personal injury lawyers are driving up the number of personal injury claims being made and the compensation culture that has grown has also led to a disturbing rise in the number of "staged accidents" occurring around the UK.

Chairman of the Transport Select Committee, Louise Ellman, said: "Wider access to justice is to be welcomed, but it has come at a significant cost, with far more personal injury claims being made than in the past.

"The police made plain to the committee that 'staged accidents' are on the increase and that, so far, we have been lucky there have been no fatalities resulting from such incidents.

"That luck may run out unless the insurance industry acts rapidly to help the police target this kind of fraud."

The committee called for a special police unit to be established to tackle the problem, paid for by insurance firms.