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This is the fourth report we have published since 2010 on the cost of motor insurance. Although premiums are now falling, our reports have lifted the lid on a highly dysfunctional market in which the pursuit of profit by the different firms involved has led to higher prices for consumers and, in some cases, business practices which are not in the consumer interest. In addition, the business models of firms in this area have, inadvertently, encouraged criminal activity. Concerted activity by a number of Government departments and agencies, working with all interested parties, is required to tackle the various problems which have been identified.
This report reviews Government plans to tackle fraudulent and exaggerated motor insurance claims, particularly for whiplash injuries. We follow up previous recommendations on court procedure and medical panels and also deal with recently announced Government policy in the following areas:
· The Government has said it will require courts to strike out "dishonest" insurance claims where, for example, there has been gross exaggeration. We agree in principle but caution against hasty legislation because there may be complex legal implications.
· The Government wishes to prohibit solicitors from offering inducements, such as cash or tablet computers, to people considering making claims. We agree.
· Steps are being taken to prohibit insurers from offering to settle whiplash claims before the claimant has undergone a medical examination. We agree and would like to see this practice banned altogether.
Progress in enabling insurers and claimant solicitors to share data about potentially fraudulent claims has been slow. When data sharing begins it should be compulsory, otherwise only the most reputable firms will be involved.
We also recommend that the Government oversee funding arrangements for the police Insurance Fraud Enforcement Department, to make sure that this unit, currently funded by the insurance industry, has a long-term future.
Finally, we also note evidence that new forms of potentially dishonest practice-such as ordering additional medical reports on psychological harm arising from road traffic accidents-are emerging. The Government should press the Solicitors Regulation Authority to stop some solicitors from playing the system to maximise their income from unnecessary medical reports.
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