Can can we trust insurers to behave?

Evans: false premise to argue that taking money off injured people will lead to lower insurance premiums

Guest post by Deborah Evans, chief executive of the Association of Personal Injury Lawyers

As the Association of British Insurers (ABI) supplies a list of excuses akin to ‘the dog ate my homework’ to pass the buck for rising insurance premiums to everybody but insurers, it’s time for a robust examination of the facts.

Repair costs are indeed rising prohibitively. The ABI talks of repair costs rising by 32% over three years due to modern cars being more expensive to fix. Let’s not forget, however, the ongoing scandal of repair costs being over-inflated between insurers. Whilst they all try to score a point against each other, every motorist pays through their premium.

Mud is slung at the cost of whiplash claims, with the ABI saying that the cost of claims has gone up by 2.3% year on year. Like repair costs, this figure is also over inflated – in reality, the cost of claims has fallen by 2.8%. So whiplash claims are not the cause.

I can’t help but feel that blame is being apportioned to whiplash claims because the ABI is pushing for swingeing reforms and it suits their agenda.

And what of the over-inflated discount rate? For years insurers have benefited from money that rightly belongs to the most seriously injured – those whose injuries are so catastrophic that they will need lifetime care.

Insurers have been able to keep a portion of this compensation as it is discounted to take account of the bank interest the injured person will earn when they invest the money awarded to fund lifetime care. The government is about to reset the discount rate – hopefully to reflect more fairly the low levels of interest that can be earned in the current economy.

The ABI would prefer the discount rate to continue to be over-inflated to under-compensate the most seriously injured people moving forwards, presumably not caring a jot if they run out of money to pay for their care towards the end of their lives.

One thing is for sure – it is a false premise to argue that taking money off injured people will lead to lower insurance premiums. Far-reaching reforms implemented in 2013 through LASPO, which wiped millions off the cost of claims, have had no long-term impact on the cost of premiums.

So what else could be done? Normally, cost-cutting initiatives start within an industry – looking at its own practices and procedures, introducing efficiencies and better practice, within an environment of continuous improvement. So stop making excuses and sort yourselves out.

APIL fights to ensure injured people are as powerful as the insurers they are up against when pursuing a claim. How we fear for the future of injured people should they end up in the small claims court as proposed in current reforms – battling forlornly against these insurers without the assistance of a lawyer.

If insurers continue with this vitriolic attitude towards the injured person, seeing them as leeches on the public purse rather than unfortunate victims of accidents, how can they be trusted to behave?

    Readers Comments

  • Anonymous says:

    What a ridiculously ill informed article!

  • Gary Stevens says:

    Well said Deborah but alas I think your comments will fall on deaf ears. The government have an agenda and intend seeing it through to the bitter end. Forget consultations they are a waste of time and energy. No matter what the profession has to say about the so called reforms the government will press ahead anyway. Once fixed costs come in the government will then hide further revenue streams by yet again increasing IPT Insurance Tax, which by the way is due to increase again on the 1/6/17 to 12% which has now doubled in 6 years. In 2011 it was 6%. IPT effects all types of insurance not just car insurance! If this government is reforming the legal system to protect the consumer then why rip the consumer off through the back door with unreasonable taxation hidden in very little advertised legislation!!

    The whole legal system is a mess and the profession is about to implode!

  • Deborah briefly mentions the fact that cost cutting normally starts within the industry itself , instead the MoJ is looking at major legal reform. As far as I can see there has been no consideration at all of how the motor insurance industry operates; even though the Transport Select Committee said it was dysfunctional some time ago. As Nigel Sugerman said to the Justice Select Committee this week the MoJ are looking down the wrong end of the telescope.

  • Tim Cogan says:

    Is anonymous ‘@7.02am James Dalton by any chance?

  • Tim kelly says:

    The nonsense insurer’s spout is never ending under the guise of the ABI. And all tosh…and I will prove it quite simply in relation to repair cost. I am an Ex insurer engineer and qualifed as expert witness.

    Are repair cost incorporated in group rating? Yes….

    The only way repair cost effect premiums is by group ratings, not but costing the insurance company more.

    The insurer underwrites a risk “upto” the market value. They agree to accept that risk for the premium paid, the group rating is a factor in this underwritten risk that already incorporates the cost of repair. This is why the Ford Ka, the Fiat 500 and Alfa romeo Mito have different ratings(all the same shell). Mito most expensive to insure, then fiat, the Ka.

    This is because the frontal repair cost on a mito is more than the 500, and the 500 more to repair than the KA.

    The increased complexity and increased repair cost does not affect the underwriting model outside the group rating.

    two cars ,both worth 30k.. one with a 16 k repair and has radar lidar fitted, the other ten k repair. Effect on premium year after the same. The claim value has virtually NIL effect on increased premium.

    Same again, car A more complex, car B standard. Car A cost 28k to repair Car B 25k to repair. Both cars constructive total loss as market value 30k. Both obtain same salvage return as CAT D, insurer pays the IDENTICAL AMOUNT on BOTH VEHICLES.

    The rising complexity has no bearing, the limiting factor is the market value.

    Proof of the pudding, Imagine a 50k ten years old….now has a market value of £1000, does the increased complexity have any bearing on the insurer’s liability? No. It could be a UFO from the military, if it was only worth a grand, that is all they would pay.

    The increased risk in cost IS an element, but that is factored in the group rating.

    When cost increase but are repairs are LESS than the market value, it only ever affects PROFIT due to savings, it does NOT increase premiums. Put that to the ABI, and their underwriters and have them prove me wrong,ask the Chartered institute of insurers as well for good merit!
    As for whiplash? been reducing for the last 4 years year on year. Straight after the Jackson reforms. And why do we have Whiplash claims? because insurer’s cannot be arsed doing things correctly and going to court!

    Have a read of my blog

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