HAVING an insurance policy that allows you to drive a car will soon, it seems, be a privilege rather than simply a requirement.
Young people are increasingly being priced out of the market for motoring, deterred by sometimes eye-watering premiums, depriving thousands of what was once a rite of passage for those in their late teens. Now, as we report today, changes in the industry look set to make insurance far more expensive for women drivers too.
New research suggests that up to a quarter of all female drivers could be forced off the road by the effect of European Union regulations stopping insurance firms from giving preferential rates to women drivers. The effect, it is estimated, will be to hike premiums for women by a staggering 25 per cent. The group most likely to give up driving and buy a bus pass are those who happen to be both female and young, hit by a financial double whammy.
Put aside, for a moment, the irony of equal rights regulations disadvantaging women. That is an issue for another day, albeit one deserving of our attention.
Instead, we need to ask ourselves what can be done to address the structural difficulties now apparent in the insurance industry. Insurance has long been a mainstay of the Scottish financial world and – unlike in banking – it is still one in which our country’s reputation is world-class. It is very much in Scotland’s interest, therefore, that the insurance industry thrives and, just as importantly, continues to enjoy public confidence.
In many ways the industry is caught in a vicious spiral. In the teeth of a recession, fewer people can afford insurance. So more people drive uninsured. And consequently, more people are involved in accidents caused by drivers with no insurance. When times are tight, there also tends to be an increase in cases of fraudulent claims – there is a certain section of society that instantly equates a small bump in the car with the words “whiplash” and “money”. Faced with these problems, the suspicion is that the insurance industry is choosing to bump up premiums as a way of offsetting the inevitable financial cost, rather than tackling them at source. Pursuing those with no insurance through the courts is a costly and in many cases hopeless cause. Tackling fraud is similarly fraught with short-term disincentives.
This is no way to run an industry. Insurance is meant to underpin activities such as driving, not regulate access to them. What is needed is a fresh look at how the industry operates, and in whose interest.
This is not a simple commercial matter that has no wider social and economic implications. Access to a car matters in rural areas particularly. There is also a skills-gap problem if fewer people sit their driving test because they see no point. Regulators, prosecutors, government and the industry must all work together on this, to ensure that insurance works for everyone.
Is need for speed worth £7bn?
AS BIG numbers go, this is a big one. The estimated cost of upgrading the rail link between Edinburgh and Glasgow with the aim of shaving 20 minutes off the travel time between the two cities has been estimated at £7 billion.
That is a lot of money. And, as we have learnt from projects such as the Holyrood parliament building and the Edinburgh tramworks, early estimates of the cost of public sector schemes can sometimes have the alarming habit of being a gross underestimate. True, some public projects such as the M74 motorway extension can come in under budget and on time, but the scars from less well managed projects still run deep.
With the country’s finances in the their current parlous state, there is a school of thought that says there is a premium on any kind of public building works that can help inject some activity into a lethargic economy. Never mind the ultimate benefits, feel the economic activity. And so there are proponents of projects like the Borders rail link who argue that the optimistic business case for the operation of the new route is only one of the factors that must be used to judge it, alongside social benefits and the economic boost provided by the actual building work.
Tempting as this may be, some rigour must be applied. Would £7bn spent on improving the east-west rail link be money well spent, especially at a time when other uses could so very easily be found for it?
More specifically, what would be the incremental advantage of each minute shaved off the travel time between the cities, and can a cold economic argument be made for the millions of pounds each shaved minute would cost?