Of Special Interest


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15th January 2012

Treasury Committee motor insurance report creates comment

Responding to the publication tof the Transport Select Committee report on the cost of motor insurance, Nick Starling, director of General Insurance at the ABI, said “We are pleased that the Transport Select Committee has recognised that spiralling personal injury claims are the real reason car insurance premiums have been increasing and made recommendations for meaningful reform. It is absolutely critical that Britain’s whiplash epidemic is tackled once and for all and the Select Committee’s acknowledgment that the bar to receiving compensation for whiplash is too low is a step in the right direction.
The Committee is also right that the fees lawyers receive need to be reviewed as they currently add unnecessary cost.
Every motorist wants the best deal and insurers are determined to deliver value for money motor insurance. Our customers are fed up of getting text messages, fed up of the compensation culture and have had enough of paying higher car insurance premiums to line the pockets of ambulance chasing lawyers and claims management companies.
We are baffled though that the Transport Select Committee has again called for the transparency of referral fee arrangements of insurers. Referral fees should be banned altogether and not made more transparent-and that ban should apply to all organisations receiving them, not just insurers. Banning referral fees and, crucially, reducing legal costs will improve the situation for customers."
Banning UK motor insurers from receiving any type of referral fees would be positive for the industry, as it would represent a more meaningful step towards combating the rise in fraudulent claims and the increasing cost of bodily injury claims, says Fitch Ratings, who added
"The measure, proposed by MPs on the Transport Select Committee would go beyond the narrower ban announced last year, which was limited to
referral fees from law firms that pursue personal injury claims.
Last year's ban fell short of curtailing the "claims-encouragement"
industries that have emerged in recent years, in our view.
The Transport Committee also said that the threshold for receiving
compensation in whiplash cases should be raised, and if the number of
claims did not fall as a result, legislation requiring objective evidence of a whiplash injury and of it having a significant effect on the claimant's life, should be introduced.
These are also potentially positive, as they would bolster insurers' own efforts to combat the rising costs of settling bodily injury claims and of fraudulent personal injury claims, about which we have been sceptical in the past.
Lastly, Prime Minister David Cameron's announcement last week of plans to cap lawyers' fees from personal injury cases at £25,000 could help
control insurers' legal costs-a key element in combating the negative
impact of claims-encouragement, as we identified in our sector outlook
published in December.
Fitch has a stable outlook for the UK non-life insurance sector in 2012, believing its capitalisation, underwriting and operating trends will generally support the ratings. We continue to believe motor insurers that counter claims-encouragement through tighter underwriting terms and superior claims management will hold an advantage over competitors that focus solely on pricing."
Ian Faulkner, MD of Metaskil, comments "News that the Transport Select Committee is calling for a higher threshold of proof for whiplash claims may seem like a further blow to motorists who make genuine claims. However, the aim of this is to cut the soaring cost of car insurance so there are potential benefits to motorists in the long term. The problems are arising when it comes to diagnosing whiplash. AXA regard it as "medically unprovable." It is a subjective injury, affecting people differently depending on the nature of an incident.
Telematics devices give you data that can tell what exactly has happened during and after a motor incident. As a result it is possible to conclusively prove the force of an accident by measuring the g-force of an impact in a crash and therefore with more data to hand it is easier to differentiate genuine claims from spurious ones. With telematics being introduced into vehicles, through insurance policies and at the manufacturing stage as standard, insurers have a unique opportunity to combat fraud and bring premiums back down to an affordable level for honest motorists."