Politicians in Whitehall and Brussels need to wake up to the problem of the spiralling costs of the compensation culture, Lloyd's chairman Lord Levene will warn in a speech.
Speaking at a City Forum lunch, Lord Levene will criticise the insurance industry for "suicidal behaviour".
The spiralling cost of compensation culture in Britain has reached the £10bn mark a year, and it is currently the greatest external threat to the industry, Lord Levene will claim.
"The way the industry behaves in 2004 could decide whether it really has a future at all," Lord Levene will say.
Despite record profits of £800m for Lloyd's during 2003, Lord Levene will warn: "It is my firm conviction that 2004 will be the real test, not just for Lloyd's but for the entire insurance industry."
In his speech, Lord Levene will say the rise in compensation culture is a threat to not only the insurance industry, but to UK business as a whole. "The tort crisis is not just an insurance industry problem but a national economic problem.
"The cost of the tort system is like a 5% payroll tax; it's a tax without representation at the most basic level and it's growing.
"We used to like to see it as an American problem. But that too is a short sighted view as there is strong evidence that the compensation culture is starting to plunder the UK economy."
Lord Levene will go on to say: "This culture is costing UK plc about £10bn a year and rising at 15% per annum. The average cost of an employers' liability (EL) claim has increased by over 100% over the last five years."
The problem of rising EL costs is now spreading to Europe, Lord Levene will claim. "Politicians in Whitehall and in Brussels need to wake up to this problem and they need to wake up now."
