The cost of motor insurance - Transport Committee Contents


Motor insurance premiums are rising rapidly, despite the long-term trend towards there being fewer casualties from road accidents. Young drivers, in particular, must pay particularly large insurance premiums. The high cost of motor insurance can cause a number of policy problems for the Government to deal with, for example it can:

  • adversely affect the lives of people who depend on their cars to get to and from work and for social reasons, particularly in areas where the provision of public transport is limited;
  • encourage some people to drive without insurance; and
  • increase the incidence of insurance fraud.

There is general agreement that premiums have increased because of the increased number of personal injury claims arising from road traffic accidents. Motor insurance premiums must now pay for compensation for personal injuries and legal costs on a far greater scale than before. Although we welcome wider access to justice, it should not provide an opportunity for people to make fraudulent claims for non-existent or pre-existing injuries. We call on the main players in the insurance industry to do more to tackle fraud, including by funding a dedicated police unit on insurance fraud, and we expect the Government to help in achieving this. We also call on the Government to specify more precisely when insurers will be enabled to gain access to DVLA information about drivers purchasing insurance.

Referral fees are a feature of the insurance industry, with fees being paid and received by insurers, solicitors, claims management firms and others. The Government is currently considering a recommendation by Lord Justice Jackson's review of civil litigation to ban or cap referral fees. This issue has ramifications which extend beyond the scope of our Report. In our view, where referral arrangements exist they should be more transparent to consumers and we make detailed recommendations to achieve this.

Uninsured driving is beginning to decrease because of better enforcement action by the authorities, supplemented by the recent introduction of a scheme for the registered keepers of uninsured cars to be warned and fined by the DVLA. We recommend that the new scheme should be accompanied by a promotional campaign, aimed at young drivers, to alert them to the requirement to have valid motor insurance. We also recommend that the penalties for the offences relating to uninsured driving be reviewed next year.

We recommend that the Government's forthcoming road safety strategy should aim to bring down the casualty rate amongst young drivers. We welcome the Minister's commitment to making the driving test more rigorous and exploring other ways of ensuring that young drivers are well trained but the proposals in this area are not new and the debate does not seem to have moved on since our predecessors looked at this issue in 2007. We recommend that specific proposals be published for consultation within the next six months, with a view to changes being implemented during this Parliament.

We also recommend that the Government facilitate investigation of effective means of deploying and publicising new technology which can assess how cars are driven by young drivers and sponsor research into international experience in restraining the number of personal injury claims relating to motor insurance.

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Prepared 11 March 2011