Comment on today’s (9 September) response from the Government to the Transport Select Committee’s report on the cost of motor insurance, from Otto Thoresen, ABI’s Director General.
“Insurers are committed to keeping motor insurance competitively priced but we urgently need reform of our compensation system if motor premiums are to come down.
“Rising claims costs from personal injury claims, excessive legal costs, insurance fraud and uninsured driving, coupled with lower investment returns in recent years, have unfortunately led to rising motor insurance bills for many customers. In fact the motor insurance sector has not been profitable for the last sixteen years because the amount paid out in claims and expenses has been greater than that received in premiums.
“The Transport Select Committee’s report was a missed opportunity as it failed to recognise that the main cause of higher premiums was our dysfunctional compensation system that encourages spurious and exaggerated personal injury claims and excessive legal costs. The Government’s reform proposals must tackle these unnecessary costs. When similar reforms were introduced in Ireland, motor premiums fell by 16%”
“To ensure young drivers are properly prepared for the roads we have long campaigned for a tougher learning to drive regime, including graduated licensing, as the best way to reduce their high accident rates. However, Government action here has fallen short of what is needed. While insurers will continue to develop products aimed at helping young drivers become safer on the roads, an overhaul of the learning to drive regime is still needed by the Government.”
Steps the industry is taking to reduce costs for customers include:
Further reducing the scope for insurance fraud. The industry has recently set up the Insurance Fraud Register, a national database of known insurance cheats, and has funded a dedicated police national insurance fraud investigation unit within the City of London police.
Campaigning for reform of the UK compensation system. For some time the ABI has been pushing the Government to reform the compensation system to reduce excessive legal costs and spurious and exaggerated personal injury claims. We are backed by several high street retailers, business groups and risk managers in local authorities and the NHS.
Policies offered by some insurers specifically aimed at young drivers to help them reduce their insurance costs.
Cost pressures impacting on motor insurance include:
· Personal injury claims. The number of bodily injury claims received by insurers rose by 72% between 2002 and 2010
· Excessive legal costs. For low value personal injury motor accident claims, for every £1 insurers pay in compensation, a further 87 pence is paid to claimant lawyers. UK consumers pay £2.7million every day to claimant lawyers through their motor insurance premiums – that is 10% of every motor premium.
· ‘Crash for cash’ staged accidents and other insurance frauds, including fake whiplash claims. Last year insurers detected 40,000 fraudulent motor insurance claims worth £466 million.
· Uninsured driving. The cost of compensating the victims of accidents involving uninsured drivers is £500 million a year, paid for by honest motorists through their insurance premiums.
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Notes for Editors
1. Enquiries to:
Liz Forster 020 7216 7444 (Mobile: 07717 578 586)
Malcolm Tarling 020 7216 7410 (Mobile: 07776 147 667)
Linsey White 020 7216 7415 (Mobile: 07939 126 553)
Katherine Riviere 020 7216 7514 (Mobile: 07725 372 636)
2. The ABI is the voice of the UK’s insurance, investment and long-term savings industry. It has over 300 members, which together account for around 90% of premiums in the UK domestic market.
The ABI’s role is to:
- Be the voice of the UK insurance industry, leading debate and speaking up for insurers.
- Represent the UK insurance industry to government, regulators and policy makers in the UK, EU and internationally, driving effective public policy and regulation.
- Advocate high standards of customer service within the industry and provide useful information to the public about insurance.
- Promote the benefits of insurance to the government, regulators, policy makers and the public.
The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 24% of the UK’s net worth and contributing the fourth highest corporation tax of any sector. Employing over 275,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with a fifth of its net premium income coming from overseas business.
Insurance and businesses protect themselves against the everyday risks they face, enabling people to own their own homes, travel overseas, provide for a financially secure future and run businesses. Insurance underpins a healthy and prosperous society, enabling businesses and individuals to thrive, safe in the knowledge that problems can be handled and risks carefully managed. Every day, our members pay out £155 million in benefits to pensioners and long-term savers as well as £58 million in general insurance claims.
3. An ISDN line is available for broadcasts.
4. More news and information from the ABI is available on our web site, www.abi.org.uk.
Malcolm Tarling MCIPR
Senior Media Relations Officer
T: 020 7216 7410
M: 07776 147667
Association of British Insurers
51 Gresham Street