Cost of motor insurance: follow up - Transport Committee Contents

Written evidence from the Ford Motor Company


Ford Motor Company welcomes the findings of the House of Commons Transport Committee report in to the cost of motor insurance. It is not in Ford's interests to see car owners priced out of the insurance market. Nor is it in anyone's interest to see an increase in uninsured driving. Ford has therefore developed a new working model to address the causes of rising insurance premiums.


—  Revenue is taken in the form of personal injury (PI) referral fees. Firms of solicitors pay these fees in exchange for details of "non fault" drivers. As PI referral fees are so lucrative motorists are encouraged to make PI claims, asked repeatedly if they have suffered bodily injury and advised of typical compensation payments that they might receive.[1]

—  Credit hire revenue: insurers are charged General Terms of Agreement (GTA) rental rates which are far higher than the actual cost of providing hire vehicles.

—  It is financially beneficial to AM companies if repairs take longer than necessary, extending the duration of this credit hire.

All these elements represent significant sources of insurance premium inflation:

—  Fees charged to repairers: accident repair centres pay the claims management companies an admin fee for repairs they carry out.


Ford Motor Company has launched the Ford Accident Management programme free of charge for the owners of new and used Ford vehicles, enabling the following advantages:

—  No personal injury (PI) "ambulance chasing". Customers are not induced to make personal injury claims. Neither Ford nor its partners make any money from PI referral fees.

—  No credit hire. No credit agreement for customers to sign (the current business model sees customers underwriting the cost of hire vehicles).[2]

—  A hire vehicle is provided to drivers needing transport. For "at fault" drivers a Ford courtesy car is provided, for "non fault" drivers a hire car, appropriate to their needs, is provided (by Ford Rental where possible).

—  The Ford model charges insurers the cost of providing rental vehicles (for "at fault" drivers) plus a small admin fee. Courtesy cars are not charged to insurers.

—  An admin charge is paid by repairers to Ford's call centre partners. This fee covers the cost of the call centre/ claims handling process.


—  Ford's model cuts out PI referral fees and excess hire vehicle charges.

—  All customer calls to the call centre are screened for potential fraud.[3]

—  The model does not prevent drivers from seeking bodily injury compensation following a road traffic incident, however it does not induce spurious claims to be made and there are no PI fees which would be passed on to insurers. Customers who express a wish to make a PI claim, unprompted, could be referred to mediation, reducing the cost of the claim.

Only 24% of the cost of a motor insurance claim is the cost of repairing the vehicles involved. By substantially reducing the remaining 76% of costs driven mainly by PI referral fees and credit hire charges the costs to insurance companies will be substantially reduced. The UK motor insurance market is very competitive, with a reduced cost base insurers will have to compete on price to win new business.


[1] Department of Transport statistics report a 10% fall in the number of road traffic accidents involving personal injury over the past three years, yet personal injury claims on motor insurance policies have increased by 43% over the same period. Association of Bodyshop Professionals (ABP) 3/8/11.

Compensation claims for the neck injury now stand at 76% of all personal injury claims as a result of a car accident, and the insurance industry is convinced that many are fraudulent. "76% is twice the average for other European countries," says a spokesman for the Association of British Insurers (ABI). "It's unlikely we've got some of the weakest necks in Europe." 2/8/11 Daily Telegraph.

[2] Credit hire: customers sign credit agreements when they are put in to a hire vehicle by claims managers. If insurance companies dispute the amount of hire the customer is liable for the debt. There have been high profile cases where customers have had to appear in court to explain the charges, eg the footballer Darren Bent vs. Allianz Insurance dispute over a £63,000 hire car bill. It has been argued that customers are not fully aware of their liability when they sign agreements to take hire cars.

[3] Car insurance companies end up paying out an extra £2 billion in costs every year due to fraudulent claims. This means that for the honest policyholder in the UK, their car insurance rates go up by an average of £44 every year (ABI).

August 2011

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Prepared 12 January 2012