FLEET insurance premiums are a 'time-bomb' waiting to explode following a massive increase in the number of third party claims which many insurance companies are unwilling to defend. The warning follows a fourfold increase in the number of undefended third party claims as a result of the Lord Chancellor's decision to raise the arbitration limit in the Small Claims Court from £1,000 to £3,000 at the beginning of 1996.

Derick Perkins, director of maintenance control at Fleet Management Services, said: 'Fleet managers are facing a time-bomb which has already started its countdown and is just waiting to explode.' He says that as legal costs cannot be recovered for small claims and 80% of motor insurance claims are within the £3,000 limit, that meant the legal cost of defending a third party insurance claim was now considered to be financially unjustifiable by a number of insurance companies.

However, such a 'simplistic' view was disputed by Derek Forgan, General Accident's commercial motor manager, who said: 'I don't dispute there will be a rise in premiums but it is unrealistic to say that insurers are changing their practices entirely and not defending third party claims because of the rise in the arbitration limit. Premiums are going to rise and the Small Claims Court move may be one of the drivers behind the increases.'