Whiplash claims and crash-for-cash have arguably been one of the hottest topics in the world of insurance over the last 15 years or so. Some see a culture of entitlement, and `why not have a go at getting easy money?’ underpinning many of these claims and there is no doubt that whiplash claims have had a major impact on the risk assessment and premium rates for motor policies. So with news of a new Civil Liability Bill in Parliament, here is the ABI response;
Welcoming the Government announcement that it will introduce a Bill to reform the law relating to whiplash claims and the way in which the personal injury Discount Rate is set, ABI Director General, Huw Evans said:
“If passed, these proposals would be great news for motorists. People and businesses are paying more for their motor insurance than ever before and we need changes to the law to tackle some of the root causes. Soft tissue injury claims have been rising year on year since 2014 as cold calling claims firms have thrived, driving up the cost of insurance.
“This Bill will ensure people in England and Wales receive fair compensation while reducing excess costs in the system. In a competitive market such cost benefits get passed through to customers, as they did after previous reforms in 2012 when average motor premiums fell by £50 over the next two years.
“The sensible new framework proposed for the personal injury Discount Rate would also deliver a system that is fair for customers, claimants and taxpayers. It is now important that Parliament agrees these proposals swiftly so people across England and Wales can start to see the benefits.”
DIRECT LINE WELCOMES REFORMS TOO
Paul Geddes, CEO, Direct Line Group, commented:
“We welcome the introduction of the Bill and wholeheartedly support the principle of full compensation for those who have suffered life changing injuries. We believe that the changes to how the personal injury discount rate is determined and the whiplash reforms which this Bill proposes will be good news for motorists as benefits from these reforms flow through.”
UPDATE 13.50 20th March – ABI Statement – Insurance Industry Commits to Pass On Savings
Following the announcement of the Civil Liability Bill today leaders of 26 insurance companies representing the vast majority of the UK motor and liability market have written to the Lord Chancellor, David Gauke, setting out their commitment to pass cost benefits on to customers. The signatories represent 86% of the motor and liability market written by ABI members.
The key extract from the letter states:
“In the UK’s fiercely competitive insurance market, each individual insurer will continue to make their own independent decisions on pricing in order to remain competitive. Indeed, such independent decision-making is a requirement of applicable competition law.
“However, the signatories to this letter today publicly commit to passing on to customers cost benefits arising from Government action to tackle the extent of exaggerated low value personal injury claims and reform to the personal injury discount rate.”
The letter and a full list of signatories, which includes all the leading personal motor insurers in the UK, has been published in full on the ABI website: https://www.abi.org.uk/globalassets/files/subject/public/personal-injury/ceo-letter-on-civil-liability-bill.pdf
SIX FACTS ABOUT MOTOR INSURANCE FROM THE ABI
- Personal injury costs add more than a third to the cost of insurance – Bodily injury claims are the biggest contributor towards claims costs and, at nearly 37% on average, are nearly double the next most significant factor (overheads) at 19%.
- Claims are rising – The Government’s own data shows that the number of soft tissue injury claims has risen by 18,000 to 780,000 a year since 2014. This has been driven by increase in other neck and back injury claims of nearly 85,000, while whiplash claims have declined by over 65,000. At the same time road traffic accidents have fallen 11% in the last five years.
- Cold calling claims cowboys are driving it – there are more than 750 personal injury claims management companies in the UK, turning over nearly £200 million a year. Since April 2017 the Claims Management Regulator has cancelled 69 licences in the sector, reflecting some of the poor practice in the sector.
- We are an international outlier – at minus 0.75% we have a personal injury discount rate that is the lowest (and therefore most costly) among any major economy in the world. Whiplash style claims are much more common in the UK than in other major economies.
- Motor insurance is getting more expensive – average motor premiums have risen for eight consecutive quarters, reaching a record £493 at the end of 2017.
- Insurers have a track record of passing on cost savings – the industry passed on savings under reforms introduced in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), which saw premiums fall by £50 on average over the next two years.