Commenting on today's announcement by the Office of Fair Trading (OFT) of a call for evidence into the cost of motor insurance, Otto Thoresen, the ABI's Director General, said:
"This will give the industry another opportunity to highlight the cost pressures motor insurers are facing, what action is needed to reduce them, and steps the industry is taking to ensure customers get the best deal when buying motor insurance.
"Rising claims costs from personal injury claims and excessive legal costs, insurance fraud and uninsured driving, coupled with lower investment returns in recent years, have unfortunately led to rising motor insurance bills for many customers. In fact the motor insurance industry has not been profitable for the last sixteen years.
"Insurers are acutely aware of the impact that higher motor insurance premiums have for their customers. This is why the industry is doing everything possible to reduce costs, for example by campaigning for compensation reform to tackle excessive legal costs and frivolous claims, and setting up the Insurance Fraud Register to further reduce fraud".
Cost pressures impacting on motor insurance include:
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Personal injury claims. The number of bodily injury claims received by insurers rose by 72% between 2002 and 2010
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Excessive legal costs. For low value personal injury motor accident claims, for every £1 insurers pay in compensation, a further 87 pence is paid to claimant lawyers. UK consumers pay £2.7million every day to claimant lawyers through their motor insurance premiums - that is 10% of every motor premium.
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‘Crash for cash' staged accidents and other insurance frauds, including fake whiplash claims. Last year insurers detected 40,000 fraudulent motor insurance claims worth £466 million.
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Uninsured driving. The cost of compensating the victims of accidents involving uninsured drivers is £500 million a year, paid for by honest motorists through their insurance premiums.
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