Cost of motor insurance: whiplash - Transport Committee Contents

1  Introduction

1.  In March 2011 we published a report on the factors explaining the rising cost of motor insurance and what the Government could do to bring premiums down. At that time average quoted premiums were increasing by 30% per annum and younger drivers were particularly badly affected. The average quoted premium for men aged between 17 and 22 in October 2010 was £2,457; the corresponding figure for women of the same age was £1,423.[1]

2.  Recently, average quoted premiums have fallen, from £1,132.24 in April 2012 to £746.75 in April 2013, a fall of 34%.[2] It should be noted that the average paid premium may be significantly lower than the average quoted premium.[3] The ABI told us that the average paid premium, based on the total value of payments for motor insurance and the total number of policies, representing 80% of the private motor insurance market, was only £440 in 2011.[4] The ABI said that paid premiums were likely to have decreased since 2011 because "quoted premiums turn into the price that a consumer pays".[5]

3.  Motor insurance is compulsory so the escalating cost of policies had the potential to cause a number of problems for the Government to deal with, including increasing the risk of people driving without insurance or committing insurance fraud. There is also a risk that if premiums are too high some people will be forced to give up their cars, which may have an impact on their work and social lives and on local communities, particularly in areas without good passenger transport provision.[6]

4.  Our recommendations covered:

  • personal injury claims and the fees paid and received by different organisations involved with claims for data about claimants (known as referral fees);
  • uninsured driving;
  • clamping down on fraud; and
  • raising the standard of driving amongst young people.

Our report was debated in the House on 8 November 2011 on the basis of a motion calling for the establishment of a cross-departmental ministerial committee on reducing the cost of motor insurance, which was agreed to.

5.  We followed up our first report with a further report in January 2012 which focused on personal injury claims and referral fees. This reflected growing concern about the increase in claims for whiplash injuries in recent years and how much of this increase was due to fraud in some form. We said:[7]

Where someone can demonstrate that they have suffered an injury, including whiplash, as a result of a road traffic accident for which they were not fully liable they should be able to claim and receive compensation. However, in relation to whiplash, we are not convinced that a diagnosis unsupported by any further evidence of injury or personal inconvenience arising from the injury should be sufficient for a claim to be settled. In our view, the bar to receiving compensation in whiplash cases should be raised. We note the Government's argument that its legal reforms should reduce the money in the system and encourage insurers to defend claims more vigorously. If the number of whiplash claims does not fall significantly once these changes are implemented there would in our view be a strong case to consider primary legislation to require objective evidence of a whiplash injury, or of the injury having a significant effect on the claimant's life, before compensation was paid.

6.  The Association of British Insurers argues that costs associated with whiplash claims make up 20% of the average motor insurance premium.[8] If accurate, this is a significant sum that deserves closer scrutiny, particularly if a sizeable part of this cost is attributable to fraudulent activity. In this report we examine to what extent the cost of whiplash claims could be reduced without reducing access to justice for the genuinely injured. We focus in particular on recent proposals by the Ministry of Justice to tackle fraudulent and exaggerated claims.

7.  We launched our inquiry on 15 March and asked

  • Whether the Government is correct in describing Great Britain as the "whiplash capital of the world"
  • Whether it is correct to say that the costs of whiplash claims add £90 to the average premium and, if so, what proportion of this additional cost is due to "exaggerated, misrepresented or fabricated" claims
  • Whether the proposals put forward by the Government, in relation to medical evidence of whiplash and incentives to challenge fraudulent or exaggerated claims, are likely to reduce motor insurance premiums and, if so, to what extent
  • The likely impact of the proposals on access to justice for claimants who are genuinely injured
  • Whether there are other steps which the Government should be taking to reduce the cost of motor insurance.

We heard oral evidence on 20 May and 17 June from a wide range of interested parties. Our Chair visited Dr Andre Brittain-Dissont's medico-legal clinic in Bloomsbury on 13 May to see a patient examined for a possible whiplash claim. We are grateful to him for his assistance and to all our other witnesses.

8.  We received a helpful memorandum from the Government and have also drawn heavily on the December 2012 Ministry of Justice consultation paper on reducing the number and cost of whiplash claims.[9] The consultation period closed in March and the MoJ indicated that it wished to await our report before publishing its own conclusions on the issues raised. We welcome the opportunity to contribute directly to the policy-making process and look forward to questioning ministers about their decisions in due course.

1   Transport Committee, Fourth Report, 2010-12, The cost of motor insurance, HC 591 (hereafter First CMI report) paragraphs 1 and 4. Back

2   Figures are an average of five best quotes to a range of customers for comprehensive cover, taken from the quarterly AA British Insurance Premium Index ( The basis on which this average was calculated changed in Q1 2012. Premiums appear to have peaked in mid-2011. For further discussion of trends in premiums see Ev w10 paragraph 2.5.7. Back

3   See First CMI report Ev 89 (memorandum from Duncan Anderson) for a discussion about the reasons for such a significant difference between quoted and paid premiums. Back

4   Ev 67 paragraph 7. Back

5   Qq 210-12 and see Deloittes press release 22 May 2013  Back

6   First CMI report, paragraph 9. Back

7   Transport Committee, Twelfth Report, 2010-12, Cost of motor insurance: follow up, HC 1451 (hereafter Second CMI report) paragraph 8. Back

8   Qq218-19, Ev 67 paragraph 7 and WL 43A [printed with report]. Also see Ev w45 section 2. Back

9   Reducing the number and costs of whiplash claims, MoJ, Dec 12, CP17/2012 (hereafter MoJ consultation document). Back

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Prepared 31 July 2013