The Royal & Sun Alliance insurance firm confirmed yesterday that it is increasing motor insurance premiums for its British customers by up to 17 per cent in response to the decision. The increase would mean that the average motor premium would go up from pounds 400 a year to pounds 468.
Royal & Sun's chief executive, Bob Mendelsohn, said motor claims costs were rising in double-digit amounts because of a government Bill introduced last April.
The warning came just 24 hours after a rival insurer, Norwich Union, announced that it will increase its premiums by up to 15 per cent.
The Association of British Insurers estimates that the total bill to the UK insurance industry will be pounds 100m.
The legislation, outlined in the Queen's Speech, substantially increased the maximum amount the NHS could claim back from insurers for treating road accident victims.
Under the old rules, announced in Labour's first Budget in July 1997, the NHS could recoup a maximum of pounds 2,949 for in-patient treatment and up to pounds 295 for out-patients. But since the introduction of the new legislation, the maximum amount that can be claimed for in-patients has soared to pounds 10,000 and out-patient rates have been changed to a flat charge of pounds 354.
The NHS is also becoming more efficient at pursuing insurers for the cost of treating road accident victims. Before the April legislation, the health service claimed only 15 per cent of its entitlement.
The Automobile Association reacted strongly yesterday to the news of the insurers' comments, saying innocent motorists were again being hit by the Government.
An AA spokeswoman said it had estimated last year that the average driver would pay another pounds 10 on a pounds 260 policy - or less than 5 per cent - to cover the cost of the changes to claiming back for treatment. "This is more than we estimated so once again innocent motorists are going to get hit," she said.
"It will be the law-abiding motorists who buy insurance who will be worst off. Someone who falls off a ladder in their home is treated in hospital without their house insurer being billed, so why should it happen to the car driver?"
The RAC Foundation said that the comments made by the insurers had confirmed its fears that there would be "significant" hikes in insurance costs.
A spokesman said: "We said that it was unfairly discriminatory against motorists and it still is."
The spokesman added that during the consultation process, the RAC was given to understand by the Government and the insurers that the costs would not be passed on to motorists through higher premiums: "Lo and behold - the insurers are saying we will have to pay higher premiums. I smell a rat."Reuse content