The cost of motor insurance - Transport Committee Contents

Conclusions and recommendations


1.  None of our witnesses suggested that it would be desirable for the Government to regulate the provision of motor insurance so that premiums were lowered. Nevertheless, there is scope for the Government to:

  • investigate the role played by legal and regulatory rules in generating the continuing increase in personal injury claims relating to motor accidents and to assess the impact of changing these rules on access to justice;
  • assist the police and the insurance industry in tackling fraud more effectively;
  • clamp down on uninsured driving; and
  • ensure that the driving test properly prepares young drivers for motoring and look at other ways of ensuring that young drivers are encouraged to drive safely and can demonstrate to insurers their commitment to doing so. (Paragraph 12)

Personal injury claims and referral fees

2.  The provision of wider access to justice is to be welcomed, but it has come at a cost. Motor insurance premiums must now pay for compensation for personal injuries and legal costs on a far greater scale than before. (Paragraph 21)

3.  In our view, the Government should ensure that arrangements exist to enable people injured in a motor accident to claim compensation, regardless of their income. However, wider access to justice should not provide an opportunity for people to make fraudulent claims for compensation for non-existent or pre-existing aches and pains. (Paragraph 22)

4.  Insurers should publish on their websites a list of the firms with which they have referral arrangements, an indication of the level of the fees paid, and a clear explanation of how referral arrangements work and their purpose. Policy holders should be sent this information with their insurance documents. When claims are made, insurers should make it clear to claimants that they need not use the solicitor, vehicle repairer or credit hire firm which is recommended by the insurer. We look to the insurance industry to implement a more transparent regime for referral fees by the end of next year and to the Government to step in, with legislation if necessary, if the industry is unwilling or unable to agree on this. (Paragraph 28)

5.  We recommend that the Department sponsor a research project on international experience in restraining the number of personal injury claims relating to motor insurance, with the aim of publishing a discussion paper on this issue during 2012 outlining possible options for change. (Paragraph 31)

Uninsured driving

6.   We welcome the action which has been taken in recent years to reduce uninsured driving. (Paragraph 33)

7.  We welcome the introduction of Continuous Insurance Enforcement: it is a sensible measure which should help reduce the prevalence of uninsured driving. We recommend that the introduction of CIE 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 first letter sent to registered keepers who appear not to have motor insurance should focus on reminding drivers of the legal requirement to insure their vehicles and should not be based on the assumption that all recipients have deliberately flouted the law. Once vehicle owners have been reminded of the requirement to take out insurance pursuit of those who fail to do so should be vigorous. (Paragraph 36)

8.  Although we can see the argument to increase the minimum penalties for driving, and for keeping a car, without insurance, the Government's focus should at this stage be on better enforcement of the existing law. We recommend that the penalties for these offences should be reviewed one year after CIE has been implemented. (Paragraph 37)


9.  We welcome the Government's aim to ensure that insurers can gain access to information held by the DVLA about drivers when insurance is being arranged. We recommend that, in reply to this Report, the Government should specify more precisely when the new data sharing arrangements will be introduced. (Paragraph 42)

10.  There appears to be significant scope for the insurance industry to do much more to combat motor insurance fraud. We call on the main players in the industry—particularly the insurance firms, brokers and comparison websites—to work together more proactively to achieve this. In particular, we welcome the initiative to establish a dedicated police unit on insurance fraud, paid for by the industry. We note the Minister's commitment to look at this proposal: he has a responsibility to law-abiding drivers to ensure that fraud is taken seriously by the industry and minimised. We recommend that, in reply to this Report, he update us on progress in discussions on this issue and on the action the Government has taken to assist in ensuring that a successful outcome is achieved, preferably by the start of the 2012-13 financial year. (Paragraph 44)

Young drivers

11.  We welcome the Minister's commitment to making the driving test more rigorous, exploring other ways of ensuring that young drivers are fully trained before they are licensed, and to making an advanced driving course available which can effectively signal to insurers that drivers who have completed it are safer. Many of these ideas were discussed in our predecessors' Report into novice drivers. The Minister's commitment must now be backed up by a consultation document setting out the measures the Government wishes to explore, a timetable for implementing any legislative and procedural changes, and an indication of likely costs and how they will be budgeted for. We recommend that the Government publish such a document within the next six months, with a view to implementing changes to the driving tests and other measures during this Parliament. We will pay close attention to the Government's proposals. (Paragraph 49)

12.  We recommend that the Department for Transport facilitate investigation of effective means of deploying and publicising new technology which can assess how cars are driven by young drivers and thereby provide more information on which risk assessments can be made. For example, we suggest that the Department could host a conference on this issue involving all relevant parties, during the summer, and establish and participate in an industry working group on how this technology can be most effectively used. (Paragraph 52)


13.  Although the Government is not responsible for the cost of motor insurance there are several good reasons for it to be concerned at the recent increases in premiums for what is a compulsory requirement on drivers and we have identified a number of actions it can take to help bring premiums down. In particular, the Minister pointed out that other departments are responsible for issues such as referral fees and action against insurance fraud but we look to him to press the case across Whitehall for the measures we have recommended. Within his own remit, the Minister has already acted decisively to help reduce uninsured driving. We now look to him to turn his attention to making the driving test more rigorous and bringing down the casualty rate amongst young drivers, something which in our view should be central to the Government's forthcoming road safety strategy. (Paragraph 53)

14.  The insurance industry also has a big part to play in bringing premiums under control. If referral fees continue they should be more transparent. We are not convinced that the increasing prevalence of referral fees throughout the sector has left premiums unaffected and we suspect that the market will be less "dysfunctional" if consumers have a better grasp of where their money goes. We would also like to see the insurance industry do more to tackle fraud. The Department for Transport should bring pressure to bear on the main players to work together, and with the police and other authorities. (Paragraph 54)

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