Further Supplementary evidence from the
Association of British Insurers (ABI) (CMI 13b)
I am writing to you about the recent Transport Select
Committee oral evidence session on "The Cost of Motor Insurance"
held on Tuesday 11 January 2011. The ABI was disappointed that
relevant aspects of our submissions to the Committee were not
acknowledged during this session, particularly in relation to
fraud, personal injury costs and the discount rate.
You asked during the session why insurers are "reluctant"
to reduce fraud. This is not the case: addressing insurance fraud
is one of the ABI's priorities. As we made clear in our submission,
our members are investing more resources in detecting fraud than
ever before, with positive results: in 2009, insurers detected
£840 million of fraud, representing an 11% increase on 2008.
On an industry basis, we continue to support the Insurance Fraud
Bureau, which is funded entirely by the insurance industry, specifically
focused on detecting and preventing organised and cross-industry
fraud. We are also currently piloting the Insurance Fraud Register,
an insurance industry database of known frauds. As well as enhancing
cross-industry data sharing, the Register will allow the insurance
industry to share data with the National Fraud Authority which
provides intelligence to enforcement agencies in order to disrupt
fraud.
Close working with the police is essential to ensure
that fraudsters are not just detected, but also appropriately
punished. As such, we are currently in discussions with the City
of London Police and the National Fraud Authority to identify
whether there are ways to improve the way police and insurers
work together to bring successful prosecutions, mindful of the
increasing strain on police resources.
We are not only interested in detecting and prosecuting
fraud, we also want to prevent it happening in the first place.
As mentioned by the Minister for Road Safety, we are working with
the DVLA to secure real-time access for insurers to its driver
database. This would mean that all driving convictions and offences
are disclosed accurately to insurers, thereby ensuring that customers
are charged an accurate price for their cover.
The Committee also expressed an interest in how much
personal injury claims have increased. In our submission we give
a range of figures. Feedback from ABI members and EMB suggests
that the cost of bodily injury claims as a proportion of total
motor insurance claims has more than doubled in the last 20 years
and now accounts for around half of all motor claims costs.
We believe that more needs to be done to tackle these
costs, for example by implementing the recommendations of Lord
Justice Jackson's review of the costs of civil litigation to introduce
much needed reforms into the personal injury claims process and
to increase the size of claims beyond £10,000 that can be
referred to the Road Traffic Accident (RTA) claims portal (as
referred to by the representative from APIL at last week's evidence
session).
We were concerned that the Committee did not address
the Lord Chancellor's recent confirmation of his intention to
conduct a review of the discount rate, particularly as it was
one of the witnesses, the Association of Personal Injury Lawyers,
which pressed for this review to take place. As covered in our
supplementary submission to the Committee, the ABI strongly opposes
any reduction in the discount rate which will lead to hundreds
of millions of pounds of increased costs for insurers, which will
ultimately have to be passed onto consumers through higher insurance
premiums.
We are not aware of any objective evidence demonstrating
that claimants are currently undercompensated. This review is
not necessary, has been prompted for the wrong reasons and involves
no objective consultation. With such huge cost implications for
the insurance industry's customers and the Government, to have
such an opaque process with no formal consultation is wrong and
represents bad policy making. We, therefore, urge the Committee
to press the Lord Chancellor for an open consultation on the review
of the discount rate.
January 2011
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