It's official - everyone is to blame for higher car insurance premiums

24 August 2011

carIt can hardly have escaped anyone’s notice that car insurance premiums have gone mental, with typical annual increases of between 25% and 40%. While it is tempting to blame the insurance companies, who are out to make pots and pots of money after all, the UK head of a global insurance company thinks differently.

While the head of AXA probably has a vested interest in claiming innocence, he probably has a point. In addition to the referral fee culture encouraging frivolous insurance claims following an accident, which, to its credit AXA have outlawed within their company, people are just looking for an easy buck- to the soaring cost of the rest of us.

Some people are just a pain in the neck

Official Department for Transport statistics show the number of UK car accidents actually fell by 10% over the past three years, yet in the same period, the numbers claiming for an injury suffered in a car accident has increased by 43%.

The substantial increase in claims relate to smaller injuries, mainly whiplash, now running at about 1,200 new claims every day. While these could all be genuine sufferers in genuine agony, it seems inconsistent that the NHS spends about £8m a year treating genuine whiplash, while insurers pay out around £2bn in compensation. Perhaps.

Why now?

Well, as we all know, times are tight for many people and so the temptation of an undiagnosable injury seems too much for a growing number of people. It seems that looting is not just a pastime for the young and disillusioned.

Secondly, the ‘no win, no fee’ culture permits recovery of high legal costs from insurers rather than the claimant, provides too great an incentive to try it on. Specifically, in 2010, the Ministry of Justice introduced a new process for dealing with motor injury claims of £10,000 or less and set a fixed fee for legal costs incurred at each stage of the process.

This means that, for a typical whiplash compensation claim of £2,500, the lawyer knows he or she will earn a fixed fee of £1,350. No wonder we are all bombarded with telephone calls, text messages and TV adverts aimed at racking up as many fixed fees as possible.

A simple claim like this will, with other associated charges,cost the insurance company's  about £4,400. Every time.

But what can be done about it?

Short of giving the population a compulsory morality transplant, is there anything that can be done to stop it?

As far as whiplash is concerned, there is actually no medical process in which a doctor can either diagnose or disprove whiplash, which is why whiplash is a fraudster’s special dream. In 2010, 133,000 fraudulent insurance claims were detected, totalling £919m, an increase of 9% on the previous year. And those were the detected ones.

However, some countries have taken action to thwart the naughty malingerers. In Germany for example, there can be no claim for whiplash where the shunt takes place under 10km/h (6.2mph).

Also, if the Government and insurers could work with medical bodies to agree formal criteria for the diagnosis of whiplash, it would be far easier to prove or disprove cases. AXA would also like the onus of proof to rest with the claimant rather than the insurers having to disprove it. Well of course they would, and while it may deter those trying it on, this could also cause more trauma for those genuinely injured.

As a trailblazer on this issue, AXA also think referral fees should be banned. With an average value of around £800 per referral, this can add up to big bucks, and perhaps explains why insurers are essentially defecating in their own rear garden when the insurance company of the non-liable party to an accident sells their customer details on for a swift back-hander, knowing the other insurance company will have to pay out, rather than them. In Ireland, where a scheme taking lawyers out of the equation was introduced, motor premiums fell by 16% in the first two years.

Of course, if insurers can’t have the nice little earner on the side, who’s to say car insurance premiums won’t go up even further? Wouldn’t want to damage the insurance company’s profits now would we...

TOPICS:   Insurance

6 comments

  • Whip L.
    The law should be changed so that it is the responsibility of the suing party to prove that they have been injured. Not the defendant to prove otherwise. If this was the case then all these whiplash cases would disappear. Only downside is the people who have whiplash, but considering it's just a sore neck for a few days with no other effects, it's hardly a big problem.
  • Skullduggery
    Perhaps they are looking at this backwards, insurance premiums got bumped by 30% a few years ago and are now receiving similar hikes again (Full NCD is 30% so they effectively just waved it goodbye). These insurance companies blame the accident claiming increase on the rise in premiums, but they work on the basis of getting a percentage profit, so they are more than happy to sell your details on to claim companies and be provided justification to raise premiums. The bigger the premium the bigger their cut. They are willingly complicit in this as it works in their favor, them pretending to be innocent in it all is misdirection. Now with my premium being so high and knowing that if i make a claim (even a non-fault) i will still see an increase in premium for the next 5 years that i have to notify the insurance company, sure i will still have my Protected NCD but that discount is applied after the premium is worked out. The actual premium will go up and ill get 30% off the new figure. So factoring in the excess and then future rises in premiums. Claiming anything less than £800 it is for me likely less costly to just do it out of pocket And this happened, I've had two occasions where i should have been able to claim for non fault incidents but the insurance company would only treat it as a fault claim because they didnt have a 3rd party to pass the cost off to. Once for vandalism and another time for being forced off the road by an idiot nearly driving into me and then speeding off. Insurance is supposed to protect me from this cost but i paid the insurance and then still had to pay £800 myself in one example or be held to ransom for sky high insurance that i need to be road legal. If i ever have a claim that is significant enough to justify putting it through insurance then I will most definitely be claiming for whiplash, I've had this pain in my neck ever since i started paying these daylight robbery companies for cover. Everybody is in the same boat, is it any surprise that people don't feel any guilt in claiming for whiplash when they are getting screwed by the people they pay for protection. How many young people who have had genuine accidents had to shoulder the cost of repairs themselves to avoid being stuck with £4-8k premiums. Whether it is in error or by design its the insurance companies that have created this situation.
  • Brad
    The insurance companys are nothing more then a monopoly who actually forgot that pricing new drivers out of driving are now never going to become the future company's customers (and possible criminals as more and more cant pay it) so in a panic have just give it "Well lets just fuck everyone instead" and no matter your experience or history you will pay more. One of the other excuses is that garages charge top money for repairs, well one idea I put forward is for things like changing a bumper or a cracked light, small works so to speak, start keeping them jobs in house, operate your own garages with people under your own company s banner? Just saying like...
  • georgesalmon
    Your Auto Insurer hates this. You can get Car Insurance for even $9 check "Auto Insurance Clearance" learn the secrets of auto insurance industry and save money
  • steve
    Every year my insurance goes up £150. Every year I shop around and find it for the same price as last year. Then my current insurer can magically match that price. They are either shit as a broker or else opportunistic profiteers.
  • yankyg
    Drivers are becoming more careful not to even "kiss" another car, so claims will start coming down. If whiplash claims were taxed, as if they are earnings, the claims would come right down. Also, anyone who claims whiplash, and says they can't work, should be banned from working, or forfeit their claim, just as happens for maternity allowance.

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