The Cost of Motor Insurance

Written evidence from European Secure Vehicle Alliance (ESVA) (CMI 23)

ESVA was formed in 1992 as an associate parliamentary group focused on reducing the incidence of theft of and from vehicles and whose interests have widened over time to be now concerned with the reduction of all vehicle related crime and disorder and a growing interest in enhancing driver compliance.

In approximate terms – the incidence of theft of vehicles peaked in the mid 1990’s at around 400,000 vehicles per year with the ratio of opportunistic to organised crime being approximately 80/20. The rate of theft of vehicles has fallen steadily since then to approximately 100,000 vehicles per year whilst the ratio of opportunistic to organised crime has reversed to 20/80 meaning that whilst opportunistic crime has reduced dramatically – the level of organised vehicle crime has not changed during the past 15 years.

In terms of detection rates for police recorded crime in 2009/10 – offences against vehicles at 11% is the lowest of all crime categories versus 28% for all crime and this pattern of poor performance has remained the same for many years due in part to the complexity of vehicle crime and its capacity to work well across police boundaries.

At the peak of vehicle crime in the mid 1990’s – the Association of Chief Police Officers (ACPO) presented a plan to the Home Office with 14 recommendations to reduce vehicle crime and ESVA has maintained a keen interest in their proposals since that time. One recommendation was the adoption of the Swedish method of number plate manufacture and distribution – they have one central supplier of security printed number plates linked to their equivalent of the DVLA which has been operating successfully since 1972.

The United Kingdom has 40,000 suppliers of number plates and little control of what is becoming to be regarded as a commodity as are batteries and windscreen wipers.

And yet the UK motorist is charged at least the equivalent of a 50% premium for a set of plates versus the price charged to Swedish motorists.

A second ACPO recommendation which was also mindful of another international initiative was to propose a £1 a policy surcharge to all vehicle insurance policies that would be invested in an expert body dedicated to the reduction of vehicle related crime and fraud. The Texas Automobile Theft Prevention Authority was established in 1991 and continues to operate on the basis of a $1 a vehicle levy alongside another collaborative network known as the National Insurance Crime Bureau (NICB) which operates across all jurisdictions in the USA. The NICB’s remit includes investigations of fraudulent personal injury claims and staged accidents.

ESVA has itself developed strong links with two vehicle crime reduction organisations based in Holland and Australia and these are funded in a significant manner by their country’s insurers. Furthermore – such organisations also operate effectively in Sweden, France and South Africa.

In ESVA’s view – the British insurance industry and its representative body – the Association of British Insurers (ABI) – have shown a disappointing reluctance to adopt a broad and collaborative approach to reducing vehicle related crime and disorder.

The ACPO Vehicle Crime Intelligence Service (AVCIS) continue to play a key role in developing collaborative networks with a number of stakeholders and are able to demonstrate meaningful returns, for example, in their work with the Finance and Leasing Association on tackling fraud on leased vehicles. ESVA is of the view that the insurance industry are well placed to reduce their costs associated with all aspects of vehicle related crime and fraud by adopting a more significant ‘invest to save’ effort with the police and other investigative bodies.

Some evidence as to the potential value of this approach can be garnered by the success the Motor Insurance Bureau have enjoyed since 2006 by working closely with roadside deployed police Automatic Number Plate Recognition (ANPR) technology.

Before 2006, the number of claims as a result of incidents involving non-insured drivers had continued to rise steadily but have fallen by perhaps as much as 5% per year since then as ANPR was deployed alongside the availability of a national database of vehicles with current insurance which was able to be searched in real time.

ESVA’s prime strategic approach to vehicle crime reduction was to adopt the same strategy as deployed by road safety accident reduction experts namely the 3E’s – Engineering, Enforcement and Education. ESVA took a particular interest in perhaps the most challenging area – Education – which involved to a small degree advising motorists as to how they could reduce their risk of becoming a victim of vehicle crime – and to a larger degree trying to alert young men as to the risks and pitfalls associated with driving stolen or non-insured cars. ESVA helped raise nationally in excess of £1million to develop ‘motor projects’ which demonstrated to young men aged 15 to 19 an appropriate way in which they could learn about cars and the significance of this approach has been to a degree reflected in the growing emphasis on vocational education.

ESVA has also followed with interest the capacity of ‘black box’ technology in cars to monitor the driving of motorists and to provide feedback which is especially valuable to young drivers. The first wave of such initiatives occurred approximately five years ago and failed to achieve sufficient market penetration. ESVA would like to pose the question as to whether a second attempt using this approach has a greater chance of success?

And finally – ESVA would like to sound a note of caution as to the efficacy of the deployment of a punitive enforcement approach associated with non-compliance of young drivers. Current road traffic legislation places a burden on new drivers who in their first two years incur six penalty points which results in their licence being revoked and such drivers being required to take again a driving test. DVLA data indicates that for the past four years – approximately 20,000 new drivers are subject to this penalty per year – but only 12,000 of these young drivers are registered per year as successfully passing their retest. What is the fate of the balancing 8,000 new drivers?

November 2010