Motor Insurance Premiums – the basis for civil justice reform

Telegraph – 14/02/2012

“Simon Douglas, director of AA Insurance said the insurance industry is “keeping premiums as competitive as possible.

“As the gap between premium income and claims payments has widened because of soaring fraud and personal injury claim costs, premiums have had to rise for everyone,” he said.

Estimates from the Association of British Insurers suggest whiplash claims have pushed up the cost of car insurance by around £90.

The Government will put a limit of £1,200 on the fee that lawyers can earn from small value personal injury claims to deter speculative cases being brought.

In return, the Prime Minister secured a pledge from insurance companies that they will pass on savings to consumers if the number of whiplash claims from consumers falls. This will cut insurance premiums compared to how high they would have otherwise been.”

In fact, since the reduction in lawyers’ fees to £1,200 (for all motor accident claims worth up to £10,000, a further cut was made with lawyers’ fees being reduced to £500).

Soaring personal injury claim costs‘ in 2012 were allegedly contributing to a £90 increase in motor insurance premiums and so a 75% cut was made to lawyer fees (the average fee being around £2,000 prior to the portal fixed fees).

James Dalton, ABI Director of General Insurance Policy – 29/10/2013

“Referral fees merely served to increase personal injury claims frequency which insurers have so often highlighted as a key factor resulting in increasing premiums.

What has made a real difference to the market though is the Government’s decision to reduce the fixed legal fees claimant solicitors can receive for filing low-value RTA personal injury claims. Insurers made a very public commitment at the Prime Minister’s insurance summit last year that cost savings would be passed on to consumers.”

James Dalton – 13/05/2014

“The ABI premium tracker shows that the average motor insurance premium has fallen by 14%. And if you don’t believe the ABI’s numbers, look at the Confused.com/Towers Watson tracker or the AA premium index. Premiums are down.”

Rob Cummings, ABI Manager for Civil Justice Polilcy – 14/11/2014

“The industry made a very public commitment at the Prime Ministerial insurance summit in Feb 2012. That commitment was to pass on costs savings to consumers from the reforms to the civil litigation system.

And the industry has clearly been delivering on that commitment.

The ABI launched an average motor insurance premium tracker in January to demonstrate our commitment to transparency on premium rates. The tracker shows that the average premium fell by 9% in the past year.

And if you don’t believe the ABI’s numbers, further evidence of the industry delivering on its commitment can be seen in the Confused.com/Towers Watson premium tracker. Their tracker provides regional variations. In Manchester and Merseyside, areas which had the highest concentration of CMCs prior to LASPO, average comprehensive premiums fell by nearly 7% in the third quarter of 2013 alone.

The insurance industry remains committed to ensuring that the necessary safeguards are in place for a much needed future rise, and are working to ensure that these can be implemented WHEN the time comes for the SCT limit to rise.”

Car Insurance Price Index (Confused.com/Towers Watson) – September 2015

“Comprehensive car insurance rises by 8.1%. Car insurance prices have risen in the third quarter of 2015. 

The average comprehensive car insurance price for Q3 2015 stands at £629, a £47 increase on last year (Q3 2014 = £582). After three years of continually falling premiums, the last 12 months have seen a steady increase in prices.

The road ahead for the ABI is clear….

In 2011 and 2012, the insurance sector heavily and repeatedly argued for reform on the basis that the cost of referral fees and lawyer costs to insurers was increasing insurance premiums.  Referral fees were banned and lawyer fees were slashed by up to 75%.  Accordingly, insurance premiums dipped for a couple of years.

However, the insurance sector is now arguing that they have been unable to maintain these reductions due to ‘soaring’ fraud and the high level of compensation being paid to injured victims.

Nevertheless, insurers continue to engage in making pre-medical offers, encouraging claimants to settle claims without the benefit of any medical report or evidence to advise them on the extent of their injuries and any potential need for treatment. Insurers continue to contact claimants directly even when they have instructed solicitors – an example of this was recently highlighted by Kerry Underwood here.

If an insurer could please explain how contacting injured victims directly and making offers of compensation without evidence of any actual injury is conducive to tackling fraud, then please could they do so.  This very common practice regularly reminds road accident victims of the opportunity they have to receive compensation without having to prove that they were injured.

Motor insurance premiums are rising again. With the 3.5% insurance premium tax increase coming in in November 2015, the cost to consumers will only continue to increase.

Lawyer’s fees are as low as they possibly can be. Therefore, the ABI will now shift up a gear in its quest to get the small claims limit increased. That way, they will eradicate most lawyers’ fees altogether by making legal costs irrecoverable in over 90% of claims. The introduction of Medco and further attacks on general damages may well see that percentage increase.

And now that motor insurance premiums are rising again, the ABI will once again have their headline that fraud is adding an extra £100 to the cost of their insurance and this will be used to support claims for further reform.

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