The true cost of motor insurance

Road Traffic accidents and Motor Insurance – March 2011

House of Commons Transport Committee - Fourth Report
The cost of motor insurance

Last week saw the publication of the House of Common’s Transport Committee’s report into the cost of motor insurance. This followed a lengthy inquiry and evidence from those in the insurance and personal injury claims industry.

The report gave several useful recommendations:

1. Insurance companies should be transparent and declare how much they receive from solicitors in referral fees and importantly, that  consumers have a choice.

“In our view, consumers are largely unaware of how much money moves around the insurance industry when they make a claim, particularly if they were not at fault for the accident. We suspect consumers are often confused about why their insurer insists that they use a specific vehicle repairer or solicitor and about whether they are entitled to make their own choice. The Legal Services Board has made recommendations about the transparency of referral fee arrangements in the legal sector which we consider should form the basis for a transparency regime throughout the motor insurance market.

Insurers should publish on their websites a list of the firms with which they have referral arrangements, an indication of the level of the fees paid, and a clear explanation of how referral arrangements work and their purpose. Policy holders should be sent this information with their insurance documents. When claims are made, insurers should make it clear to claimants that they need not use the solicitor, vehicle repairer or credit hire firm which is recommended by the insurer. We look to the insurance industry to implement a more transparent regime for referral fees by the end of next year and to the Government to step in, with legislation if necessary, if the industry is unwilling or unable to agree on this.”

Jennie Jones explains that “many people do not realise they can choose their own solicitor to act on their behalf. They do not have to be tied to the insurance company’s solicitor. They can select someone they have used before, closer to home or work or someone recommended by a friend.” 

2. Young drivers and uninsured driving

Worryingly, the Inquiry heard that 10% of drivers under the age of 34 are unaware of the legal obligation to have motor insurance.

“We recommend … a promotional campaign, aimed at young drivers, to alert them to the requirement to have valid motor insurance. We also recommend that the first letter sent to registered keepers who appear not to have motor insurance should focus on reminding drivers of the legal requirement to insure their vehicles and should not be based on the assumption that all recipients have deliberately flouted the law. Once vehicle owners have been reminded of the requirement to take out insurance pursuit of those who fail to do so should be vigorous.

The Inquiry highlighted that insurers do have a role in helping young drivers find affordable insurance. The high cost of insurance may prompt some to drive without insurance and this impacts on all road users.

The committee stated that “Given the importance of this issue from a public policy perspective, we recommend that the Department for Transport facilitate investigation of effective means of deploying and publicising new technology which can assess how cars are driven by young drivers and thereby provide more information on which risk assessments can be made”. New technology may hold the answer for insurance companies and allow more bespoke risk assessments and therefore premiums.

This report is interesting and further explores a number of issues discussed recently as a result of the European Court decision on sex discrimination and insurance premiums, where it was held that Insurers could not charge female drivers lower premiums purely on the grounds of sex. This decision and the report highlight the difficulties faced by young drivers and draws attention to the practices within the insurance industry.

If you have been involved in an accident or have an issue with your insurance company and how your claim is being handled, then please contact Jennie Jones and her expert team on accidents@nockolds.co.uk or 01279 712534.

Link to full report:
http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtran/591/59110.htm

Jennie Jones (profile) Tuesday 22nd March 2011
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