Driving premiums down: fraud and the cost of motor insurance - Transport Committee Contents


1  Introduction

1. This is the fourth in a series of reports we have published since 2011 on the cost of motor insurance.[1] 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]

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.[3] Nevertheless, our original inquiry uncovered a host of problems relating to motor insurance and led to a surge in ministerial interest in this area.[4] 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.[5]

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 as:[6]

    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.[7] 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.[8]

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.[9] In response, the Ministry of Justice (MoJ) said:[10]

    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.[11] 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.[12] 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:

·  Raising 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

2   CMI 1, paragraphs 1 and 4. Back

3   AA British Insurance Premium Index, Q1 2014. Back

4   For the Prime Minister's summit on motor insurance see CMI 3, paragraph 32. Back

5   https://www.gov.uk/government/news/cma-sets-out-changes-for-private-motor-insurance. Back

6   CMI 3, paragraph 9. Back

7   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 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/306064/cases-registered-cru-2013-14.csv/preview.  Back

8   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

9   CMI 3, paragraphs 24-29. Back

10   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

11   https://www.abi.org.uk/News/News-releases/2014/05/Insurance-cheats-feel-the-heat-value-of-fraudulent-claims-uncovered-by-insurers-hits-record-level.  Back

12   https://www.gov.uk/government/news/bogus-claims-to-be-thrown-out-as-government-steps-up-insurance-fraud-crackdown.  Back


 
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