THE boss of insurance giant Axa today warned that UK society is “drifting into a compensation culture” as the company announced “strong” half-year results.

Axa, which employs 15,000 people across the UK, including more than 1,000 at its Ipswich offices, said the group’s underlying earnings had “improved significantly” in 2011 - but called for measures to curb the problem, which it said was sending up motor premiums.

The insurer said it had become the first - and so far the only - insurer to unilaterally ban referral fees in a bid to curtail market practices which fuel the ‘compensation culture’, and therefore increases in motor premiums.

Axa UK and Ireland group chief executive Paul Evans called for a “radical steps”, including a review of the fixed fees earned by personal injury lawyers.

“There seems to be no question that UK society is drifting into a compensation culture, encouraged by an industry of claims management firms and personal injury lawyers that has formed to profit from road traffic accidents,” he said.

“Indeed, in some regions of the UK, the frequency of personal injury claims are more than double the level we see in the Republic of Ireland, where these practices are yet to take hold.

“AXA remains the only insurer to have banned referral fees and whilst we welcome signals that the Government is minded to impose a market-wide ban on referral fees, they are a symptom – not the cause – of the increase in personal injury claims.

“We believe more radical steps are needed. Firstly, a robust review of the fixed fees earned by personal injury lawyers. The fixed fees under the Ministry of Justice (MoJ) Portal are quite obviously too high at �1,200 given they allow an average referral fee of around �800 to be paid and still generate sufficient profit.”

The near doubling in claims management firms between 2008 and 2010 stood as “testament to the level of profitability available” from personal injury work, he said.

“Logic suggests that a reduced standard fixed fee in the region of �400 would still allow personal injury lawyers to earn reasonable profits,” he argued.

He called for an increase in the burden of proof for whiplash to drive out fraudulent claim, and a comprehensive medical evaluation of muscle damage as it was these incidents, he said, which were driving the increase in claims, causing motor premiums to rise.

“Such an evaluation will help deepen our understanding of minor soft tissue injuries – and provide the basis for better diagnosis – so that those who are injured by the negligent acts of others receive the timely and fair compensation they are due – and spurious claims can be filtered out and rejected without incurring unnecessary cost,” he said.

The group said its wealth management, healthcare and general insurance was on track to deliver “strong, profitable growth”, with UK direct personal insurance revenues rising by 22%, taking total UK and Ireland revenues to �2billion.

The sustained growth and improved profitability across each of the UK and Ireland operations against a backdrop of challenging conditions showed the benefits of the reorganisation which the group underwent in late 2010, said Mr Evans.