What will you spend your extra £40 on?
Well, I for one am looking forward to my insurance premiums falling £40 next year. That’s what we’ve been told will be the result of new government measures tackling the whiplash ‘epidemic’ in this country, writes Alan Feldberg.
The argument is that by cracking down on fraudulent and exaggerated whiplash claims, the industry will save £1bn a year. Insurers have promised to pass those savings on 100% to drivers, leading to an average decrease of £40 a year in the price of our premiums.
There’s just one thing that doesn’t add up.
Insurers have paid out less in personal motor claims every year since 2010 but our policies haven’t gone down accordingly. In fact, our premiums have tended to get more and more expensive even though motor insurers are paying out less and less. Their overall motor payouts shrunk by 30% between 2010 and 2015, from £8.3bn to £5.8bn, but premiums have still been going in the opposite direction.
There may be justified reasons for this, such as the rightful rising costs of repairing technology-heavy cars, but will those reasons not still be there next year? And the year after that? If so, how does the £40 claim stack up?
Certainly fraud is an issue. The latest figures reveal that a new soft tissue claim is made by a driver in the UK every 40 seconds, with one in 60 of us seeking compensation for whiplash each year. Despite a reduction in road traffic accidents, whiplash claims have shot up 50% in a decade. Clearly, these are the sorts of numbers that can’t continue and are part of the reason why the UK has been anointed with that rather tabloidesque tag, ‘the whiplash capital of the world’.
The government proposals, which appeared to have slid off the table after Brexit but then suddenly remerged nicely packaged last week, suggest capping whiplash claims at £425 compared the average payout of £1,850 now, and paying nothing for minor injuries. Not surprisingly, the insurance industry has welcomed these reforms proposed by Justice Secretary Liz Truss. It has campaigned long and hard for this and appears now to have nearly won the day.
But, call me cynical, why would an industry that has spent so much time, money and effort arguing for something for years happily give away the fruits of its victory to the general public? Philanthropy? To improve its reputation? Unfortunately, there is no way to accurately measure the savings these reforms might bring, so no way of gauging if they’re being passed on to drivers 100%, 10% or one per cent. And if premiums rise next year, we’ll simply be told they would have risen by an extra £40 without these reforms.
But the simple logic of it is that insurance is business, business lives off profit and their profit comes from premiums.
I recently spoke to someone who explained how using evidence-based science to establish claims is keeping whiplash fraud in check in many other countries. Essentially the medics don’t just assess the claimant; they also study the details of the incident to establish if it could have caused the injury. These medics have scientific training and a huge database of similar incidents to help them determine ‘causation’.
A pilot in this country had also been successful, although the results haven’t been published yet. So the obvious question after that was, if this approach works so well why haven’t UK insurers picked it up yet? His response was off the record, and the few insurers we approached declined to answer.
Perhaps there are too many conspiracy theories around and I certainly don’t understand the intricacies of it all (which is why I approached the industry for clarity), but let’s watch this space. If I’m £40 richer in time for Christmas 2017 I’ll hold my hands up…