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


3  Conclusion

37. In 2010, when we first started to look at the factors explaining the rising cost of motor insurance, there was little political interest in the issue. Our inquiry put the issue on the political agenda. Since then, there have been debates in Parliament, a prime ministerial summit, legislative changes, industry working groups, and reports from the Office of Fair Trading and the Competition Commission. Our recommendations have been taken seriously by Government. Many have been taken up for further consideration or implementation or, where the Government has not agreed with us, we have received a full explanation of the alternative view. Our recommendation that the Government should not at this change the threshold below which whiplash claims are dealt with using the small claims court procedure was particularly influential. We have also provided a forum for insurers and solicitors, so often at loggerheads in the debate on the cost of motor insurance, to debate the issues. This, as one of our witnesses noted, has opened up the debate.[53] All in all, our work in this area has demonstrated the value of good scrutiny by a select committee.

38. Our work has 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. Furthermore, the business models of firms in this area have, inadvertently, encouraged criminal activity. There is no clearer example of this than insurance firms' willingness to pay compensation for whiplash claims which they suspect are fraudulent without requiring the claimant to undergo a medical examination.

39. The Government has shown its commitment to tackling these problems. However, many of the measures discussed in this report are still being designed. Other action is also required-such as implementation of the Competition and Market Authority's recommendations to improve the information available to consumers about the products they buy from motor insurers, to control the costs of car hire for an insured driver not at fault for an accident, and to regulate price comparison websites.[54] The work of the City of London Police Insurance Fraud Department is also important, particularly in relation to deliberate 'crash for cash' scams, and there is far more the Government could do to improve young driver safety.

40. There is scope for greater co-ordination between Government departments to tackle these inter-related questions: and work on these issues must carry on after the 2015 election. The Government must continue to engage with all interested parties, rather than just with the insurance industry, as has been the case in the past. It must all make sure that its reforms lead to a sustainable reduction in motor insurance premiums, which must not be allowed to bounce back to the extraordinarily high levels of the turn of the decade. If momentum is lost, the problems we have identified and attempted to solve will re-emerge, to the detriment of motorists who end up paying the bill.


53   Your Legal Friend (CMI0008) paragraph 9. Back

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


 
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Prepared 4 July 2014