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