£2.9bn motor scam? FCA unmasks soaring costs from dodgy injury claim factories

FCA demands tougher penalties as injury claim fraud pushes UK motor premiums to breaking point

The Financial Conduct Authority (FCA) has issued a stark warning about a growing crisis in the UK’s motor insurance industry—one it claims is being driven in part by fraudulent or exaggerated injury claims. The City watchdog now wants a concerted crackdown on the lawyers, doctors, and firms allegedly enabling these bogus claims.

In a statement this week, the FCA said there is “growing evidence” that claimants are “layering” minor injuries—effectively inflating soft tissue damage into something much more costly, causing a spike in the cost of bodily injury payouts. These dubious claims are helping to drive motor insurance premiums higher, despite a fall in actual accident rates.

Between 2019 and 2023, the average cost of bodily injury claims rose significantly, even as the overall number of accidents resulting in such claims declined. The FCA’s analysis shows that these injury claims alone contributed to 8% of the total increase in insurance costs across that period.

The figures are alarming. In just two years, from 2022 to 2024, the cost of bodily injury claims jumped 7% to reach £2.9 billion. Meanwhile, costs associated with replacement vehicles soared by a staggering 48%, totalling nearly £700 million. The regulator warns that the presence of multiple players in the claims process—such as accident management companies (AMCs), claims management companies (CMCs), and credit hire firms—is worsening the problem.

It doesn’t stop there. Some insurance providers are pocketing referral fees for passing claims to these companies, raising fresh concerns about perverse incentives within the system. These referral payments range from £30 to over £1,000, and in some cases, take the form of solicitor dividends or other commercial arrangements rather than direct cash.

In response, the FCA wants the government’s Motor Insurance Taskforce—set up last October by the Department for Transport—to prioritise tackling this abuse. It urged the taskforce to work closely with professional regulators like the Solicitors Regulation Authority (SRA) and the General Medical Council (GMC) to consider tougher sanctions against anyone involved in claim fabrication.

The regulator is particularly concerned about professionals who knowingly assist in exaggerating injuries. Whether it’s a solicitor pushing unnecessary claims or a doctor embellishing a diagnosis, the FCA believes stronger penalties are needed to disincentivise these practices.

The broader picture looks increasingly grim for motorists. UK drivers are already shouldering steep premium hikes, with the FCA revealing that average motor insurance costs have surged by 21% since June 2022. That’s significantly higher than in comparable European nations, including Germany, France, Spain, and Italy.

For many drivers, the FCA’s revelations may confirm long-held suspicions that fraud—not just market forces—is behind the soaring cost of cover. What’s more, this layered claims culture may be making it harder for genuine claimants to access fair compensation, as insurers look to claw back losses through tighter scrutiny and higher premiums.

As the Motor Insurance Taskforce prepares to release its next steps, the industry waits to see whether the promised “fairer deal” for UK drivers will materialise—or whether the murky world of inflated claims will continue unchecked.