Clearwater Solicitors Call For Transparent Car Insurance Market

27th January 2014

There are a lot of downwards pressures on car insurance premiums at the moment. Government measures are seeing the number of whiplash injury claims decline, while the Competition Commission’s investigation into motor insurance and the Association of British Insurers’ response to it has encouraged insurers to drop some of the business practices that cost consumers unnecessary money and ramp up the cost of road traffic accident claims. As a result, the AA Insurance Premium Index found that average annual comprehensive car insurance quote in January was £533, or 4.6% lower than in the previous quarter.

Consumers might think that these measures would see the cost of car insurance premiums undergo sustained, lengthy declines, but statements from AA Insurance Director Simon Douglas indicate this may not be the case.

He said motor insurance premiums are currently on a “helter skelter slide,” adding that he expects the decline in the cost of car insurance will become less marked during the first quarter of 2014, and will then level off into the next quarter.

However, he also outlined two other possible scenarios – that the falling cost of car insurance will “end with a bump”, or even will “bounce sharply up again”.

The government has been making political capital from the falling cost of motor insurance, but if the future of premiums is still in doubt, then the market ought to be made more transparent. Drivers have no choice as to whether to take out car insurance or not, and should at least be able to benefit from an accountable, transparent market.

The motor insurance sector has been pushing the government to make market conditions more favourable, continually repeating the mantra that the UK is “the whiplash capital of the world”, despite the fact that supporting evidence for this is scanty.  They have been asserting that the number of road traffic accident injury claims is a ‘crisis’, and the government has gone along with their assertions, even while fraudulent claims account for less than 0.4% of the cost of premiums, and with whiplash injury claims – with whiplash one of the most common personal injuries sustained in car accidents – accounting for just 5.8% of the average motorist’s insurance premiums.

Car insurers are also seeing great profits, which is unusual for an industry in ‘crisis’. In February 2013, Direct Line posted a £7 million growth in its Motor business’ operating profit, reaching £261.8 million, and with profit growing from 14% the previous year to 16%. Admiral saw a 19% increase on its operating profits in its 2012 results.

With car insurers’ profits growing, and with the market becoming more favourable, customers should be aware of the factors that may lead premiums to ‘bounce back’ when they should be forecasted to see sustained declines. People should be aware of which insurers are using reductions in the number and cost of claims to increase their dividends and profits rather than to reduce their premiums.