Insurance prices are “at an all-time high”, but who’s really to blame?
In a presentation to the House of Commons, the Transport Select Committee cited several reasons explaining the rising costs of car insurance, but none of these make it easy to attribute ‘blame’ to any one sector.
Firstly, the committee stated that the increased in organised crime syndicates committing motor car insurance fraud is making a substantial impact on the average cost of an insurance policy. According to the findings of some experts, £44 per policy sold in the UK will go towards the thousands of pounds worth of compensation paid as a result of ‘staged’ car accidents. Historically this was more common in urban areas, but as post code checks on claimants became more widely used, the crime has spread across the country as the operators regularly move to avoid detection. Moneysupermarket.com found that 5% of drivers under 35 – or a substantial one in every twenty – had deliberately braked to cause the car behind to crash into them, making the other party liable for the cost of damage.
The second reason given was that the cost of credit hire arrangements is disproportionately high. Under these schemes, if a motorist’s vehicle is damaged in an accident and a hire car is used to keep them mobile during the repairs, if the claim is successful against the other party then costs for the car hire can be claimed as part of the settlement. What is happening appears to be that the insurers charge up to 2.4 times the actual cost of the car hire from the other insurer, significantly increasing the risk and loss and raising prices accordingly.
Although in excess of 400 uninsured vehicles are seized on a daily basis, uninsured drivers still pose a significant threat on the road, killing approximately 160 people and causing 23,000 injuries per annum. It is estimated that £30 of the average policy goes towards covering costs incurred in accidents by uninsured drivers. The Motor Insurer’ Bureau found that an uninsured driver is up to five times more likely to be driving dangerously and become involved in an accident or collision, and that they are typically involved in additional criminal activities. Furthermore, despite the climbing cost of insurance policies, the market leaders claim that the business has been unprofitable for the last 16 years. According to their statistics, for every £100 collected in insurance premiums the company will pay out £123 in claims, largely due to the number of uninsured drivers and the rise of the personal injury claim seeking large damages for minor injuries.