Increasing insurance premiums – who can we blame?

Rising_cost_of_car_and_motorcycle_insurance

Who is to blame for expensive insurance?

There is quite a campaign running at the moment as the Government is soon to make up its mind how it feels about compensation, insurance companies, and the fees of personal injury lawyers.

My position on any such debate is you must be told the whole story.

Much of the argument is about road accidents as these produce the highest number of accidents, and therefore the most compensation claims. The insurance industry is working very hard to persuade us all that our increasing insurance premiums are the fault of injured people who claim compensation, claimant personal injury lawyers, fraudulent claimants, and uninsured road users.

Looking at the Parliament website today I came across the most recent information on road accidents, and the number of accidents and injuries are both down, and down significantly.

The information comes from the Department for Transport which produces regular statistics. They look at the year ending June 2010 and compare it with the average for 1994 – 1998, and the figures indicate:

The number of casualties in road accidents reported to the police fell by 32 per cent from the 1994-98 average, 320,000 to 217,000, for the 12-month period to June 2010. Over this period 25,660 people were killed or seriously injured, 46 per cent fewer compared to the 1994-98 average, and 1,990 people were killed, 44 per cent less than the average figure for the years 1994-98.

Reported child (aged 0-15) casualties fell by 54 per cent over this period. The number of children killed or seriously injured for the 12-month period to June 2010 was 2,590, down 62 per cent on the 1994-98 average.

• There were 160,000 reported road accidents involving personal injury for the 12-month period to June 2010, 32 per cent fewer than the 1994-98 average. Of these, 23,040 accidents involved death or serious injury, 43 per cent fewer (40,481).

Provisional estimates show:

Reported road casualties were down 3 per cent, and killed or seriously injured casualties were down by 7 per cent, compared with the 12-month period ending June 2009. The number of fatalities fell by 19 per cent over the same period.

• Pedestrian and Car user casualties reported to the police both showed overall reductions of 3 per cent compared with the year ending June 2010, whilst motorcycle user casualties fell by 6 per cent. The number of motorcycle users reported killed or seriously injured fell by 6 per cent whilst pedestrian and car user KSI (killed or seriously injured) casualties fell by 8 and 9 per cent respectively. However, the total number of reported pedal cycle casualties rose by 4 per cent, and the number killed or seriously injured rose by 1 per cent.

The overall number of reported child casualties fell by 3 per cent, with those killed or seriously injured falling by 6 per cent compared with the year ending June 2010.

• The number of injury road accidents reported to the police fell by 3 per cent and the number of fatal accidents by 19 per cent compared with the 12-month period ending June 2009.

• Road traffic was nearly 1 per cent lower compared with the 12-month period ending June 2009.

Maybe a few too many figures, but the clear indication is there are fewer accidents and casualties on the road.

This is a trend which can be seen since 2004 when the total casualties were 319,928, and they are now 217,000. That is a huge drop over six years.

There is a delay in the insurers seeing the benefit of this obvious trend, but it looks as if their risk is improving.

So what is the complaint of the insurance industry, and what are they not telling us?

Here are a few thoughts:

  • Since 2003 in road traffic compensation cases the fees of claimant’s lawyers have been fixed for the majority of cases.
  • Since 2010 those fees have been reduced further.
  • It is in the hands of the insurer to investigate and settle clear cut cases quickly.
  • No evidence has been produced to show a greater proportion of the injured actually seek compensation.
  • Cases are regularly sold to claimant lawyers for a “referral fee.” The insurance companies and insurance brokers are the major recipients of referral fees, but this income is not included in the figures shown by the insurance companies. These fees can be more than £700 per case.

An insurance company makes money by understanding the risks it insures, by setting a reasonable premium to take account of those risks, and by investing the premiums whilst it waits for the worst to happen. So what is going wrong, and are we being told the whole story?

Maybe the comparison websites, and new entrants into the market, have forced down premiums.

Maybe the difficult investment conditions have produced poor results for the insurers.

Maybe the insurance companies have cut their operating costs so hard they cannot efficiently deal with the claims they receive.

The insurance companies certainly tell us they are having a difficult time. We all need to insure under the law, and also from the point of view of social responsibility, but if we are going to hear from the insurers then let’s hear the whole story. Tell us about your premium income, and tell us about the claims you pay out, but do tell us how you spend those referral fees.

Sources:

Parliament website briefing paper,

Department for Transport 2010 quarter 2 provisional estimates

Department for Constitutional Affairs announcing fixed fee regime for road traffic cases on 6 October 2003

Court rules governing the procedure for lower value road traffic cases since 2010.