Insurers slam government over cost of car insurance

man in car
The government is “putting young lives at risk and increasing the cost of motor insurance” by failing to introduce reforms such as a graduated driving licence, the Association of British Insurers (ABI) said this week.

 

The insurance company trade body says insurers have kept their side of a bargain set at a government and insurance industry “summit” three years ago, but that the government has broken the promises it made. James Dalton at the ABI said: "While good progress has been made, more can be done to help bring down car insurance premiums, particularly for young drivers.” So what’s really going on?

Driving reforms

One of the issues discussed at the summit was the cost of personal injury claims to the insurance industry – and, because costs are reflected in premiums, its customers. Whiplash claims alone were pushing up the cost of car cover for everyone by about £90 a year, according to insurer Aviva. And to make matters worse, a hefty proportion of such personal injury claims are known to be fraudulent. That’s why the government has since implemented civil justice system reforms designed to strip out excessive legal costs and crack down on frivolous and exaggerated claims.

Customer savings

According to the ABI, such measures have enabled insurers to pass on total savings of nearly £600 million to their customers. Premiums for young drivers, however, have remained high because “measures to improve young driver road safety have stalled”.

Young and dangerous

Drivers between 17 and 19 years of age make up just 1.5% of all licence-holders. But new motorists in this age group are involved in 12% of fatal or serious accidents.

Even young drivers who stick to the rules and stay safe face sky high insurance premiums as a result. To save lives and reduce premiums, the ABI is therefore calling for the introduction of a ‘graduated’ driving licencing regime. It believes this will reduce the number of crashes involving young motorists. "The Government’s continued failure to make meaningful changes to improve young driver testing and training is not only putting their lives at risk, but keeping the costs of motor insurance for young drivers unnecessarily high," Dalton said.

Claim costs

Other areas where the ABI believes the government could do more to lower insurance costs for motorists include sending more personal injury claims to the small claims courts. “The small claims track, with the appropriate safeguards put in place, is a cost-effective, simple and speedy way of settling lower value personal injury claims,” said Dalton, who would like to see the small claims limit raised from £1,000 to £5,000. Insurers also want more to be done to clamp down on rogue claims management companies that bother potential clients with nuisance calls and persuade them to make frivolous claims. And Aviva is calling for a total rethink of whiplash claims so that motorists with genuine injuries are offered rehabilitation rather than cash handouts. "This will help the genuine injured party return to health while cutting the cost of motor insurance by at least £32 for everyone," it said.

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