Car insurance premium increases: all for profit?
Insurance premiums are rising even though the cost of claims has fallen, law firm claims.
A law firm has accused car insurers of profiteering.
Earlier this week, the Association of British Insurers (ABI) released five ways it wants the Government to help cut car insurance premiums.
The suggestions include increased training for young drivers, safer cars, a freeze on Insurance Premium Tax (IPT), reforms to stop ‘frivolous’ personal injury claims and taking steps to tackle insurance fraud.
“Every motorist wants competitively priced insurance that meets their needs,” says James Dalton, ABI’s Director of General Insurance Policy.
“Consumers benefit from a very competitive insurance market, but insurers are facing the perfect storm of rising costs from personal injury claims, repair bills and Insurance Premium Tax.”
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Why are premiums rising?
However, new data has emerged that suggests the ABI may not be giving people the full picture. The cost of car insurance claims fell in 2015, for the fifth consecutive year. These costs are now 30% lower than in 2010, meaning insurers have saved £2.5 billion, according to injury lawyers Thompsons Solicitors.
Despite these plummeting costs car insurance premiums continue to rise. In the 12 months to July 2016 the average premium rose by 17.2% or £84 to £485, the firm added.
“This latest information that has been sat on by the ABI completes a picture they would rather not have out there – of a booming industry with healthy profits and cash reserves paying out huge dividends,” says Tom Jones, head of policy at Thompsons Solicitors.
“This isn’t a sector buckling under the weight of ‘fraud’ as they would want the British public to believe.”
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Insurers vs lawyers
It marks the latest salvo in an escalating battle between insurers and solicitors, with each side keen to blame rising premiums on the other.
The ABI argues that premiums are rising due to a fraud ‘crisis’ in the car insurance industry.
However, Thompson Solicitors believes that the effect of fraud is being exaggerated and used as an excuse to increase premiums in order to boost profits.
“If there is fraud it should of course be tackled but the issue is being cynically manipulated. Fraud is being repeatedly used as a battering ram for reform that would actually mean only more profit for insurers,” says Jones.
The ABI is asking the Government to reform the personal injury compensation system in order to “stem frivolous and exaggerated personal injury claims” that it says are costing motorists almost £3 million a day.
There are also calls from the insurance industry for the Government to tackle insurance fraud with the ABI saying that 70,000 fraudulent car insurance claims in 2015 were detected and stopped.
Thompson Solicitors disputes the extent of the insurance fraud crisis.
“The insurers are taking the British public for fools – they haven’t defined fraud, they haven’t provided any independent evidence that it actually exists at the levels they claim and they aren’t reporting it to their shareholders as a ‘material risk,’” says Jones.
“In our view fraud is being cynically exaggerated to attack the rights of honest motorists and to justify premium increases.
"It’s high time the insurance industry stopped their manufactured hysteria about fraud and concentrated on providing greater transparency so consumers can see if the ever growing premiums are justified.”
What do you think? Are solicitors trying to talk down the impact of fraudulent injury claims on rising premiums, or do you think insurers are profiteering? Is it a bit of both? Let us know in the comments section below.
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Comments
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There is something of a vicious circle going on in the car insurance world. The insurance companies say they have to provide a buffer against the rising number of uninsured drivers on the road. But young drivers (and others driving for the first time in the UK) are finding that their first insurance outweighs the cost of the vehicle, so are prepared to run the risk of driving without insurance. An apprentice in our department who lived in a high risk part of London was quoted over £8000 for his first year's cover on a modest VW Polo. You can see why the uninsured drivers are on the rise, it's because of the insurance companies allowing for the uninsured drivers. etc. etc. etc.
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Although solicitors are going to bat for their corner, I do believe the insurance companies are over exaggerating the fraudulent claims and this has been confirmed by statistics that claims are falling year on year over the last few years and the insurance industry are making record profits, so again the motorist is another easy target - ripped off again!
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19 October 2016