Admiral’s profits dented by soaring compensation claims

| November 9, 2011 | 0 Comments
Admiral’s profits dented by soaring compensation claims

Motor insurance company Admiral has issued a profits warning causing its shares to plummet by a quarter, after being hit by an increase in personal injury claims.

The company, which owns Elephant and Confused.com now expects 2011 profits to fall at the lower end of the range of analysts’ estimates.

The number of personal injury claims soared by 42 per cent, from 552,000 four years ago to 741,000 last year, according to figures from the Department for Work and Pensions, and many of the drivers had suffered no real injuries.

While Admiral supports the government’s pledge to tackle the so-called ‘compensation culture’, its full-year earnings have taken a knock from a ban on referral fees.

Insurers companies generate referral fees, which could be up to £1,000 per referral, by passing on details of no-fault claims credit hire companies, personal injury lawyers and other firms keen to sell their service to accident victims.

On a positive note, Admiral said that it has increased the number of vehicles insured by more than 20 per cent to over three million.

Admiral also reported a 30 per cent increase in group turnover to £582 million in the third quarter of the financial year.

It has also achieved strong growth in its international insurance business, with International car insurance turnover up 45% to £27m.

In related news, Louise Ellman, the chairwoman of the Transport Select Committee, is calling on the government to establish a cross-departmental working party in order to drive down the cost of motor insurance.

According to an AA survey, quoted premiums have now reached an average of £921, a level which is unaffordable for many drivers, particularly young drivers.

Addressing the Commons, Ms Ellman criticised fraudsters and claims management companies for pushing up the cost of motoring.

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