This week, representatives of the UK insurance industry trooped to the House of Commons to tell the Transport Select Committee that the price of their product cannot be expected to continue to escalate without something being done about it.
The cost of the average motor insurance premium has risen by a terrifying 40% in the last 12 months. In 2009, drivers were on average paying £568, now they’re being asked for £791. The reasons for this? They are many and varied, but there is no doubt surrounding whom the Motor Insurers’ Bureau feels is to blame.
MIB chief executive Ashton West told the Telegraph: “I think it is because of aggressive marketing (of personal injury lawyers) on daytime TV. It is creating a view that if you are involved in an accident which is not your fault, you can collect a pot of money.
“If society wants to be able to claim in every genuine case for ache pain and sprain, there is a price to be paid for it.”
The MIB told the Select Committee that 70% of all PI claims were for whiplash, which they say are hard to prove or quantify. The cost of pursuing these claims, they argue, is prohibitively expensive, and had greatly fuelled the rise of the cost of motor insurance.
This undoubtedly represents the insurance industry attacking a target which has become somewhat of a scapegoat and an easy target.
The real reason insurance is so expensive in the UK is because so many drivers, especially younger ones, drive without holding a valid policy. Around 160 people are killed by uninsured and untraced drivers every year, and 23,000 are injured, says the paper.
So why do so many drivers continue to flout the law? It’s simple, really – the penalties for being caught without insurance usually outweigh, by some margin, the cost of purchasing a policy. The current fine is £200, plus six penalty points. Many young drivers checking price comparison sites for the first time will be quoted figures of ten times that for a one-litre Vauxhall Corsa that cost them £300. There are no discernible reasons for drivers to purchase insurance, besides honesty, so they don’t.
Some commentators have suggested that the UK system needs a radical overhaul. In countries such as New Zealand, the government provides automatic third-party insurance if a car is MOTed and taxed. This would hopefully eradicate, to some extent, the outrageous premiums some drivers pay. As I have said before, road safety would obviously be a concern if some young drivers had powerful cars in their command. For these reasons the UK needs to adopt a more educational, preventative approach, rather than just allowing insurance companies to charge what they like and scare customers away.
Another commentator reminds us of the example of Ireland, where the provision of personal injury compensation was transferred to the government and still insurance costs rose. At the minute, despite their protestations, the insurance industry still makes a tidy profit. Let’s not forget that.
Source: The Telegraph
Date Published: November 12, 2010
Author: David Brown