Fears that the UK is being consumed by a compensation culture - fuelled by claims that companies and schools are cancelling sports days to avoid the risk of being sued - are unfounded, a report will say today.

A study by market analyst Datamonitor found that, after falls in recent years, the number of claims is not rising.

But the perception that society is becoming increasingly litigious is having serious consequences for the industry, the report will say.

David Stephenson, financial services analyst at Datamonitor and author of the report, said: "The level of media coverage that surrounds personal injury claims has created a myth about the rise in their numbers, and there certainly is a degree of sensationalism about it, but the underlying trend is that claims numbers are falling.

"Since the demise of The Accident Group and Claims Direct, there has been a definite contraction in the number of spurious claims being submitted to insurers."

Spiralling legal fees and advances in medical science have pushed the cost of claims up by nearly ten per cent to an estimated £7.2bn for last year alone, and Datamonitor forecasts costs will increase by 40 per cent to £10bn by 2009.

In 2003/04 the decline in accident claims was offset by a rapid increase in disease claims, and the total number of claims increased by nine per cent to 770,243 - due largely to a surge in claims ahead of the closure of the British Coal respiratory disease scheme.

Anecdotal reports that some schools have cancelled sports days due to difficulties in obtaining insurance cover are a reflection of the rising cost of claims for insurers, rather than realistic fears that a claim may be made, the report will say.