The cost of motor insurance - Transport Committee Contents


Written evidence from esure insurance Ltd (CMI 09)

In esure's view, the primary cause of recent market increases in the cost of motor insurance is the dramatic increase in the frequency of low impact personal injury claims (ie whiplash) against motor insurers since 2008. As this frequency has risen, insurers have been forced to raise rates to balance premiums taken in against claims paid out. This is an industry-wide phenomenon and the balance is necessary to ensure the viability and solvency of those companies offering motor insurance in this country.

esure believes that the marketing of claims management and "no win, no fee" legal services to the public via TV, radio, print, email, text and directly via point-of-sale stands has led to a step change in public willingness and propensity to lodge claims for injuries. We believe this has also led to an increase in those exaggerating symptoms and/or fraudulently reporting non-existent symptoms. The number of suspected fraudulent personal injury claims increased 84% from mid 2009 to mid 2010. Personal injury claims linked to organised fraud (ie proven fraud rings) increased over 400% in the same period.

esure has carried out extensive market research showing that the majority of people (76%) believe such claims "marketing" leads to exaggerated and/or fraudulent claims against insurers. 81% also believe that action now needs to be taken to curb this activity to reduce claim fraud. This research was carried out for esure by ICM in May 2010 and we can provide copies on request.

The number of serious road accidents - and accidents in general - is decreasing in the UK but the number of claims for injuries in car accidents is rising. This discrepancy is shown clearly in figures from the Government's Compensation Recovery Unit (part of the DWP) who saw a 13.3% increase in notified injuries from car accidents during 2008 and 2009 versus the published figures on road accidents for the same period which fell by 6%.

Costs to insurers are increased disproportionately by the intervention of claims management companies and legal firms who seek to "capture" potentially injured parties.

An insurer who is contacted directly by an injured third party will pay - on average - half the amount in total costs for the claim compared to the same case if referred by a solicitor or claims management company - despite the injured party ultimately receiving the same in compensation by dealing direct. This has a huge impact on the costs of insurance to individuals.

The key public policy issues in esure's opinion therefore do not relate to the provision of competitive insurance to the public. A very broad and competitive market exists for car insurance with the vast majority of customers still able to gain access to competitive rates.

We believe the key policy issues are:

  1. (1)  the effect on uninsured driving among those for whom insurance has previously been at the borderline of affordability when weighed against the very low fines for uninsured drivers.
  2. (2)  the effect of a growing compensation culture in the UK that is being fermented in car insurance: in particular, the extent to which claims management companies and solicitors who "market" to potential victims is increasing and the wider impact of this on other areas of society (ie benefit fraud).

We would be very happy to elaborate at greater length and provide documentary evidence should you require it.

November 2010



 
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