So, insurance premiums have fallen by 12 – 14 per cent according to the insurers? Yeah right. Like many of you out there, I have seen my premium go up yet again, despite having an accident free year, whilst driving exactly the same car. I do appreciate, however, that it’s not just about me. I may have suffered for being female (the European court objected to women being automatically viewed as safer drivers and given reduced premiums). However, as the news stories run online, many of the comments posted reflect some disbelief in the figures.
So how is this figure calculated? Well, the figures are industry-generated and are shrouded in mystery, to say the least. And, let’s face it: the renewal figure quoted by your existing insurance company is often higher than if you switch to a new provider. Loyalty, like crime, doesn’t pay. Sometimes, the same insurance company will even quote you a lower price online or through a price comparison website than they do in the renewal letter. The price you are quoted is not always the price you end up paying. So the calculations could use any of these premiums - statistics could be handpicked to prove a point. Hence our distrust.
So why does it matter? Reducing insurance premiums is a key objective of the Government. The desire to reduce the cost burden has informed recent policy developments in the personal injury field. Referral fees have been banned. Injured people now contribute to their lawyers costs in order that the bill to the wrongdoer –or more importantly their insurer - is reduced. This avoids passing on that cost to the motorist through premiums. That change, plus the introduction of significantly lower fixed fees for lawyers in road traffic cases, has reduced the bill to the insurer markedly. So, we should rightly expect premiums to fall in a way we can all measure.
But the effects cannot have been felt so quickly. The new rules only apply to cases which began after April 2013. It takes time to run a legal case, and the bill isn’t payable until it finishes, so these cost reductions will only just be starting to really deliver benefits to the insurer. How can that possibly have translated into lower premiums so soon? The Government is unlikely to look at further reforms until it sees reductions in premiums which are linked to the last set of reforms. It wants to see any savings passed on to the motorist through a real reduction in premiums. Recent decisions, such as the sensible decision to put the increase of the small claims limit on hold, will have disappointed insurers. In order to kick start the policy agenda once more, insurers will need to maintain a tangible drop in premiums. Hence, presumably we should expect a repeated flurry of announcements as insurers try to prove their point, or am I just being sceptical?
I’m all for a real reduction in premiums. Otherwise all this reform has been all pain, no gain. I’m as keen as anyone else for an update on progress. However, in order to gain trust in the figures would it not be better if the Government were to commission annual research into motor premiums across the industry? There would then be a central, independent method of calculation that was open to scrutiny and a report that was free from bias.
Such figures could then be used to inform policy making with confidence, not suspicion.