1 Introduction |
1. This is the fourth in a series of reports we have
published since 2011 on the cost of motor insurance.
Our original interest in this subject was due to the extraordinary
increase in motor insurance premiums at the start of this decade.
In 2010 average quoted premiums were increasing at an annual rate
of over 30%. 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.
2. In more recent times, average premiums have fallen
back. According to the AA, average quoted premiums fell by 16.6%
in the year to March 2014 and are now lower than at any time since
late 2010. Nevertheless,
our original inquiry uncovered a host of problems relating to
motor insurance and led to a surge in ministerial interest in
this area. The Office
of Fair Trading also launched an inquiry focusing on the costs
borne by the insurers of drivers at fault for accidents, particularly
in relation to car hire and repairs, which has led to further
work and recommendations by the Competition and Markets Authority.
3. Our 2012 and 2013 reports focused principally
on the impact of the number of claims for whiplash injuries on
premiums. We made recommendations aimed at reducing fraudulent
and exaggerated claims, whilst maintaining access to justice for
the genuinely injured.
4. The Government has described a whiplash injury
The neck pain which occurs after the soft tissue
in the spine has been stretched and strained when the body is
thrown in a sudden, forceful jerk.
There is no generally accepted objective test for
a whiplash injury. There are no physical manifestations of the
injury and whiplash cannot be diagnosed using a CT or MRI scan.
The number of whiplash claims from road traffic accidents peaked
in 2010-11 at over 560,000, around 70% of all claims arising from
such accidents. Since then, the number of claims has diminished.
However, claims for back or neck injuries have increased in this
time. The Government told us that in 2012-13 87% of road traffic
personal injury claims related to the neck area.
5. In our 2013 report we drew attention to the lack
of authoritative data about the prevalence of fraudulent or exaggerated
claims for whiplash injuries. Estimates by insurance firms and
solicitors of the percentage of claims which were fraudulent ranged
from 0.1% to over 60%. We called on the Government to press the
insurance industry to provide better data about fraudulent or
exaggerated personal injury claims, so that there is a stronger
evidence base for policy decisions.
In response, the Ministry of Justice (MoJ) said:
We intend to better define the nature and extent
of the whiplash problem by working with stakeholders to develop
accurate baseline data on the number of neck and back whiplash
and other soft tissue injuries. Building on this we will work
to identify and classify fraudulent or exaggerated whiplash claims.
This will enable us to validate the estimates made by those in
the personal injury sector and ensure the public are aware of
the true scale and nature of the problem.
6. In May 2014, the Association of British Insurers
(ABI) announced that there had been 59,900 "dishonest"
motor insurance claims in 2013, with a value of £811 million,
up by one third from 2012.
These figures were quoted by the Government in an announcement
on 7 June of new measures to combat motor insurance fraud, which
we will discuss below.
It is not clear from published material how the ABI has arrived
at these figures or what counts as "dishonest". Nor
is there any evidence that these figures have arisen from the
work to develop accurate baseline data which the Government told
us it would begin. We reiterate our earlier recommendation that
the Government should act to ensure that there exists better data
about fraudulent or exaggerated personal injury claims, so that
there is a stronger evidence base for policy decisions. Since
the Government has cited the ABI's figures for dishonest claims
in 2013 it should explain how the figures have been arrived at
and how dishonest claims have been defined.
7. Our 2013 report focused on proposals by the Ministry
of Justice to reduce the number and size of whiplash claims. Its
proposals covered four main areas:
the threshold for dealing with whiplash claims using the small
claims court procedure from £1,000 to £5,000 (thereby
capturing the majority of such claims);
· The creation
of independent medical panels of accredited professionals to improve
diagnosis of whiplash and the provision of objective medical information
to the court;
· Action to challenge
fraudulent or exaggerated claims; and
· better data
sharing between insurers and solicitors.
In our next chapter we look at each of these areas,
reviewing the Government's response to our 2013 report, the views
of 29 insurance and legal firms, trade associations and other
interested parties which responded to our request for submissions
on the Government's position on these matters, and our correspondence
with the Government, the Solicitors Regulation Authority, the
ABI and the Motor Accident Solicitors Society (MASS) about specific
questions raised by the submissions. We are grateful to those
who contributed to this inquiry.
1 The previous reports were: Transport Committee, Fourth
Report, 2010-12, The cost of motor insurance, HC 591 (hereafter
CMI 1); Twelfth Report, 2010-12, Cost of motor insurance - follow up,
HC 1451; and Fourth Report, 2013-14, Cost of motor insurance: whiplash,
HC 117 (hereafter CMI 3). Back
CMI 1, paragraphs 1 and 4. Back
AA British Insurance Premium Index, Q1 2014. Back
For the Prime Minister's summit on motor insurance see CMI 3,
paragraph 32. Back
CMI 3, paragraph 9. Back
CMI 3, paragraph 20 and tables 1 and 2. The total number of road
traffic accident claims in 2012-13 has been corrected upwards
to 818,334. The equivalent figure for 2013-14 is 772, 843 see
Transport Committee, Eleventh Special Report, 2013-14, Cost of motor insurance: whiplash: Further Government Response to the Committee's Fourth Report of Session 2013-14,
HC 902 (hereafter Further reply to CMI 3), p4. Back
CMI 3, paragraphs 24-29. Back
Reducing the number and costs of whiplash claims: A Government response to consultation on arrangements concerning whiplash injuries in England and Wales and Cost of motor insurance - whiplash: A Government response to the House of Commons Transport Committee,
Ministry of Justice, October 2013, Cm 8738 (hereafter First
reply to CMI 3), paragraph 23. Back