The NHS has recently announced new plans to claim back more money from underwriters for car accidents and injuries caused in the work place. The health service can currently claim back up to £620 when a person is admitted to hospital and this will rise to £672 in an attempt to cover costs. Unsurprisingly, the insurance industry is up in arms about this, and has issued its standard warning that premiums are likely to rise.

“Insurers will bear a greater responsibility for the financial costs of the treatment of injured persons,” said Chris Hanks, general manager of Allianz Commercial. “This will translate into additional claims expense, which will need to be funded by increased premiums.”

“The increase in NHS charges is a further inflationary pressure on the cost of claims for insurers,” echoed Axa’s Matthew Scott. “Axa Insurance will inevitably have to take this into account in its regular reviews of the adequacy of premium rates.”

So just how expensive is car insurance likely to get? Research by the AA’s British Insurance Premium Index found that the average premium rose by £35 last year – going up from £594 to £629. Premiums have doubled in price since 1994, and the increase shows little sign of that slowing in the near future.

Clearly the recent NHS announcement is not solely responsible for these hikes. Modern cars are far more technically advanced then their predecessors, and therefore are more expensive to repair. The increased threat of litigation has also driven up costs, and it is estimated that of the £8.4 billion of car insurance premiums paid out every year, 10 per cent goes towards paying personal injury claims.

Some insurance industry insiders have gone as far as predicting that premiums are likely to go up by 15 per cent a year, and say that the figure could be as high as 50 per cent if insurers were not absorbing costs themselves. So is it right that the NHS is increasing the demands it places on the industry at a time when it already appears to be at breaking point?

Even though it is very difficult to feel sorry for insurers they may have a point. Car insurance is already prohibitively expensive, especially at the lower end of the market where many drivers have seen premiums rocket by hundreds of pounds. This decision is likely to drive up costs for drivers even further, and there may well come appoint when younger people especially are being priced off the roads.

“It is unacceptable that taxpayers have to pay for the medical treatment of someone injured at work because employers fail to take adequate steps to protect their workforce,” said a Department of Health spokesman who defended the decision.  “Hospitals are now able to recover the costs and decide where they want to reinvest that money.”

However, there is no point in saving the taxpayer a few quid further along the line, only to make the price of motor insurance an unmanageable burden. Ultimately market forces will decide how high premiums become, and it is likely that competition will ensure prices do not get out of control in the near future. However, driving is increasingly becoming a luxury, and the government needs to be careful it does not leave those who rely on their cars unable to use them.