Britain dubbed 'whiplash capital of the world'
The ABI has told the House of Commons Transport Committee that the motor insurance industry paid out £10.7 billion in claims in 2011, of which whiplash claims cost around £2.2 billion.
Insurers admitted that there were a number of factors that affect the price of a premium, and that individual insurers' pricing structures varied, but the cost of claims was highly indicative of the overall level of premium that an average motorist can expect to pay.
The average cost of an insurance premium in 2011 was £440. Whiplash claims represented 20% of the overall claims expenditure, or £90 of the average premium.
The ABI said: "There are a number of contributing factors that have led to the rise in whiplash claims. The first factor is the dysfunctional compensation system, which has led to a growing compensation culture in the UK.
"Aggressive marketing by claims management companies and referral fees paid by claimant solicitors (banned from April 1 this year), have led to an increasing number of personal injury claims in general, and whiplash claims specifically."
Answering the question: "Is it correct in describing Great Britain as the `whiplash capital of the world?', the ABI replied: "Yes".
Figures revealed by insurers show that the UK has substantially higher than average whiplash claims (78%) than EU counterparts (48%).
The ABI added: "Although the lack of an objective test for minor whiplash injuries is an international problem, it is the UK's civil litigation system and wider compensation culture which has led to the steep rise in whiplash claims in recent years."
As a result, The Government has proposed creating a panel of medical experts to oversee accident claims.
It also wants to make it easier for firms to challenge claims by raising the threshold of claims in the small claims court from £1,000 to £5,000.