Odurinde Finance & Business Blog

Britain Car Insurance

Image courtesy of THEfunkyman

Not only have Britain’s 6.3 million drivers suffered a 15.8p per litre increase on last year’s price of petrol, but car insurance, too, has gone through the roof, and is set to soar further. How?

After a year of research and consultation, Lord Justice Jackson finally presented the Jackson Report in January 2011. An investigation into the impact of the personal injury claims business on the insurance industry, the report aims to serve as the foundation for reform of civil lawsuit process and payouts, whilst delivering access to justice at a fair and proportionate cost.

Significantly, the report has found that 2010 saw car insurance premiums increase by a massive 40 per cent on the previous year, and post that drivers are set to see a further increase of 20 per cent in 2011… An alarming projection for drivers who are also set to suffer from the ECJ’s recent ban on sex discrimination in policy calculations.

The report has found that personal injury claims now account for an incredible 50 per cent of the cost of our car insurance premiums, and has, naturally, faced staunch resistance from claimant lawyers.

We now live in an ‘Insurance Age’: we insure everything we can against loss or damage, and have increasingly been encouraged to do so over the last ten years or so by radio and TV adverts insisting that we claim what is rightfully owed to us, giving rise to that tongue-in-cheek adage, ‘where there’s blame, there’s a claim’.

A survey carried out by actuarial consultancy and industry experts EMB found that in 2009, for every £1 the retail motor industry received in policy payments, it would, conversely, be paying out £1.20 in costs and claims, making 2009 one of the insurance industry’s least profitable years in history – a profit loss that the insurance industry has obviously had to make up by charging more in other areas.

Another report from the EMB, presented in 2010 to the Commons Transport Select Committee, said:

“Over 40 per cent of personal injury lawyers pay referral fees to receive work from insurers or claims management firms. Fees range from £200 to £1,000 per referral.”

Adding that:

“In our view, the biggest single factor driving price increases is the burgeoning cost of bodily injury claims… We estimate that twenty years ago bodily injury claims accounted for around 20 per cent of UK motor insurance claims costs. In 2010 we now estimate that proportion to be 50 per cent.”

The EMB’s suggestion is corroborated by road death and injury statistics over the last ten years. 1989 saw 341,592 people killed or injured on Britain’s roads, falling to 222,146 in 2009. These statistics just don’t tally with the increase in our insurance premiums, and serve as evidence that the personal injury claims business is having a severely detrimental effect on the cost of the nation’s car insurance premiums.

Car insurance comparison website moneysupermarket.com, have urged drivers to shop around for their car insurance, and not to just stick with their insurer when their year’s policy expires. The price comparison website estimates that an average of £1.7bn per year is lost collectively by the UK’s 6.3 million drivers, who lose an average of £270 each, per year.

An insurance expert at the company commented:

“Insurers count on customer apathy to reap the profits, so it is alarming so many motorists are prepared to waste their hard-earned cash by not looking for a better deal. Even if you think your quote can’t be beaten, it only takes a few minutes to make sure you really do have the best value policy to suit your needs.”

However, a positive step has been made towards eliminating a large majority of unnecessary, false and exaggerated claims, and hopefully the Jackson Report will serve to achieve this whilst making it easier for those who have really been injured as a result of a road traffic accident to claim and be fairly recompensed.