Written evidence from the Department for
Transport (CMI 20)
NOTE ON PUBLIC POLICY IMPLICATIONS OF THE
RISE IN THE COST OF MOTOR INSURANCE AND POTENTIAL GOVERNMENT RESPONSE
The rising cost of motor insurance is a particular
problem for young people, including learner drivers, who are finding
that increases are making insurance unaffordable. This is an issue
of public policy, because many young people depend on a motor
vehicle for access to education and employment; and learn to drive
for these reasons.
Significant rises in the cost of insurance might
tempt some drivers to drive uninsured, or to obtain cheaper insurance
by making false statements about their driving record (such as
penalty points accumulated) at the time of purchase, or younger
drivers being declared as a named secondary driver on parents'
insurance when in fact they are the main driver of a vehicle.
The Government is aware of these dangers. From spring 2011, we
intend to introduce continuous insurance enforcement, which involves
making regular comparisons of DVLA's vehicles database with the
Motor Insurance Database run by the insurance industry, to identify
and take action against keepers of vehicles which are apparently
uninsured. We are also working with the insurance industry with
a view to allowing them access, subject to the driver's consent,
to relevant details of a driver wishing to take out insurance,
such as age and penalty points accumulation.
It is notable that despite significant reductions
in the number of casualties, insurance costs have continued to
rise. Some of these costs reflect fraudulent claims, as well as
weak control of replacement cars, and the growth of the claims
compensation industry. We are working with the insurers on ways
of managing these costs.
We accept that higher premiums faced by younger drivers
reflect the cost to insurers of providing cover. We understand
that there are two main reasons for this. In the first place,
insurers' figures suggest that as many as a fifth of newly-qualified
drivers make a claim within six months of passing their test.
Many of these relate only to bumps and scrapes, but the overall
cost to an insurer of even modest damage is likely to be more
a young driver will have paid in the annual premium. Of course,
the cost of damage claims affects all insured drivers, although
groups that are over-represented in claims are likely to cost
insurers more. There is, however, a second area where insurers
have to make special provision in relation to young people. A
minority of accidents lead to catastrophic claims - in particular,
where one or more claimant will require long-term - even life-long
- medical care. The problem with young drivers is not simply that claims
are more likely, but that such costs are liable to be
much higher where the claimant is young. The additional public
policy concern here is that only a limited number of big insurers
can afford provision against such claims, which limits the market
in which young people can buy insurance.
Insurers have argued that these public policy concerns
support calls they have made for the Government to impose additional
regulation on newly-qualified drivers. The Transport Committee
has considered this issue in an earlier inquiry on novice drivers.
It is argued that road safety might be improved if newly-qualified
drivers were not allowed to drive in high-risk circumstances,
and various specific restrictions are proposed - which are used
in other countries, mainly where driving is permitted below the
minimum age here. The Government is committed to avoiding additional
regulation. It is concerned that the restrictions proposed would
bear down even on those who want to be safe and responsible -
who may need the use of a car for access to employment or education.
There is also a risk of perverse consequences - for example, limiting
the carriage of young passengers would prevent a sober driver
providing transport for companions who have been consuming alcohol.
There are alternative approaches. The Department
has been working on measures to improve driver training and testing,
and is considering whether further measures should be developed.
Training should focus not just on the test, but on the challenge
of independent driving - including, for example, an understanding
of the risks of particular driving conditions, and of distraction
and impairment. We also intend to work with the insurance industry
on whether new insurance products can be developed, with discounts
where young drivers have chosen enhanced training pre- and/or
post test; or are happy to accept in return restrictions such
as not driving at night.
November 2010
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