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 (http://www.theaa.com/newsroom/insurance/bipi/british-insurance-premium-index.html).
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 http://www.deloitte.com/view/en_gb/uk/f4d0e4823ebce310VgnVCM2000003356f70aRCRD.htm.
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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