Cost of Motor Insurance

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The Governments Transport Select Committee recently issued its long awaited report into the cost of motor insurance. The recommendations from the committee tackle issues such as fraud, personal injury claims, uninsured driving and young drivers.

The report recommends that insurers, brokers and comparison websites work together, proactively to combat fraud. One of the aspects in tackling fraud is for authorised access to the DVLA database to obtain driving licence information when applications are made for motor insurance. Also investigations are to be made to deploying and publicising new technology that can assess how a car is being driven by young drivers and help reduce the cost of motor cover.

The committee also recommends a more rigorous driving test, an advanced driving course to give insurers the opportunity to recognise those who have completed it are safer.

The rise in the cost of motor insurance is due to the increased number of claims, the increase in the amounts awarded, the impact of claims management companies and the increase in the number of whiplash claims. Between 2005 and 2010 casualties in road accidents fell by 23% but the number of motor insurance injury claims increased by 70%. The number of personal injury claims for 2010/11 increased by 17% on the previous year’s figure from 625,072 to 790,999. The report recommends raising the threshold for obtaining compensation for whiplash injuries to stem the increase in personal injury costs. Legal fees for settling low value motor bodily injury claims cost UK policyholders £2.4m a day according to the ABI – or £1666 per minute.

The Prime Minister David Cameron held a Downing Street summit with insurer chief executives to discuss how the government can crack down on the £2bn a year cost of whiplash claims at the end of February. A reflection of this tougher stance is shown in the recent case of whiplash fraudsters being handed down a jail term where the claimant invented an accident, where the potential pay out could have been up to £75,000. It is thought this is the first time anyone has been successfully prosecuted at the high court for a completely invented accident.

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