Before The Office of Fair Trading (OFT) presents its findings on the increase in private motor insurance premiums this December, David Powell, Underwriting Manager at the Lloyd’s Market Association, urges them to consider the underlying causes of rising costs:
“When presenting their findings, I urge the OFT to take into consideration all the factors contributing to the recent increase in motor premiums. Legitimate factors such as low investment returns are inevitable in the current economic climate. However, the OFT should recognise that the motor insurance market is loss-making and that largely unnecessary costs faced by insurers are pushing up prices for customers.
“Claims farming has led to a doubling in personal injury claims frequency since referral fees were permitted in 2003. Inflated legal costs and recoveries, unnecessary credit hire costs, fraud and uninsured drivers are the major factors pushing up costs for customers.
“Jack Straw’s 10 Minute Bill recognises the huge costs that the ‘claims industry’ has created for compensators, and whilst insurers are not likely to support restrictions in postcode underwriting, Mr Straw has made some welcome proposals to reduce the scope for abuse and fraud regarding the whiplash claims epidemic.”
Mr Powell concludes: “The OFT has an ideal opportunity to explain to customers, Government and the media that unless action is taken to address the underlying factors that are pushing up motor insurance costs premiums will continue to rise. The LASPO Bill, to reduce legal costs and ban referral fees, must be enacted swiftly, and fixed legal costs must be significantly reduced so that savings can be passed on to customers. The industry must also re-structure to remove the unnecessary and inflated costs caused by credit hire, and further regulation should not be ruled out.”
Source : LMA
