Analysis: Motorists’ love affair with low premiums is over, but legislation will help arrest spiralling costs

By IAN CROWDER
Published on Wednesday 15 February 2012 02:10

THE Prime Minister kept a lot of industry commentators away from their partners on Valentine’s evening and the topic at his Downing Street summit was far from being a romantic one – it was car insurance.

Motorists hardly need reminding that their premiums have been rocketing over the past two or three years..

Six years ago, premiums were pretty static. If anything, they were falling because of the fiercely competitive market. It was also a time when the price comparison sites were gaining ground, which kept premiums artificially low. But at the same time, industry costs were going up. In a trade magazine in 2005, the AA warned that premiums should be rising and if they didn’t the time would come when premium inflation would be in double-digit figures to compensate. That has happened, just when the recession caused insurers’ investment income to fall, leaving a glaring gap between premium income and claims payments. In fact, in 2010, for every £100 taken in premiums £123 was being paid out in claims – a situation which is clearly unsustainable.

So what’s to be done about the current situation? Already the Ministry of Justice has announced a range of reforms to the way that personal injury claims are made, including the way that success fees are paid and curbing cold-call advertising as well as referral fees. Last month, the new police Insurance Fraud Investigation Unit was formed. There are also proposals to allow insurers to access DVLA data which will cut “economy with the truth” when people taking out policies falsify their age, address and driving experience. Last year, the law on uninsured driving was strengthened – all of this will help to curb premiums.

Will David Cameron’s summit make a difference? Maybe not, but what it has done is focus attention on car premiums once again and should galvanise legislation to help manage some of the negative issues. It will without doubt, help the insurance industry to get its house in order, too.

• Ian Crowder is public relations manager for the AA.

Related Articles

• Car insurance: ‘Women must prepare for the end of gender discrimination’

  ANYONE who drives a car will have seen their premiums rocket over the past two years. A key reason for this is a rise in the number and value of personal injury claims, despite the number of car crashes on Britain’s roads falling.

  0 Comments

• Ian Crowder: Insurance cover's at a premium with fraud and foul weather

  INSURANCE Premium Tax goes up in January, which will add a further 1 per cent to the generally upward trend in the cost of insurance.

  0 Comments

• Scottish drivers pay price for English law

  Premiums rocketing as claims soar south of the Border, finds Teresa Hunter

  0 Comments

Comments

There are 1 comments to this article

Order by:

• Newest first
• |
• Oldest first

Page 1 of 1

• 1
• Show all

1

mogatrons

Wednesday, February 15, 2012 at 10:53 PM

The essence of the problem is the entire system is corrupt. Premiums have little or no bearing to actual liabilities risk.......they are based on a fixed market monster created by accountants seeking new sources of revenue for the shareholder..............Why on earth would any insurer sell on your details to a sea of predatory lawyers in the knowledge that those same lawyers will prey on the insurers??????.......Why do the police sell on your details of accidents to those same lawyers, when they themselves are reluctant to pursue the most clear cut of motoring offences?................................In short the entire system is set up to finance a perfidious civil claim system that removes the burden of law enforcement from the police and places it the hands of the diminishing number of honest motorists..................................................................................................................................Permitting the insurers to continually increase premiums, and the police to continue their dereliction of certain duties, only feeds the monster, and until the corrupt system is dismantled we will continue to see a rise in insurance evasion and fraud, and a decrease in driving standards............................and of course the only ones not making money out of this are the honest motorists.

• Report Unsuitable

Order by:

• Newest first
• |
• Oldest first

Page 1 of 1

• 1
• Show all

Logged in as:

Comment here. Start typing your comment here:

Post comment

Please adhere to our Community guidelines

Your view

Please sign in to be able to comment on this story.