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TACKLING THE HIGH COST OF CAR INSURANCE - STRATEGIC
REVIEW
8 Executive Summary
While the Government
is making numerous laudable efforts to address the high cost of car
insurance that include the Jackson reforms, a legal referal fee ban and
continuous (vehicle) insurance enforcement (CIE), although their
interventions will act to kerb inflationary pressures on the cost of
car insurance, they will not result in a significant drop in premiums
for hard-pressed motorists.
We believe that there is much more that needs to be done to reduce
specualtive or fraudulent claims, reduce costs in litigation and to
tighten penalties including for uninsured driving.
The followng, are our recommendations:
Summary of necessary
changes in relation to claims management companies (CMCs)
- The
banning of all referal fees, not just legal referral fees.
- The
banning of advertising, cold-calling, SMS texts and other personal
injury case-generating practices as, for example, used by some CMC or
legal websites.
- The
banning of up-front payments to clients.
- Rendering
it unlawful for CMC functions to be provided outwith a legal firm,
whether via a conventional or alternative business structure (ABS)
model.
- Making
it a legal requirement that any CMC operation is structurally and
operationally managed by a qualified lawyer.
Summary of necessary
changes in relation to legal costs in personal injury claims
- Putting
in place the proposals from the last section.
- Proceeding
with the Jackson reforms
- Reducing
the legal fees in fixed fee regimes, perhaps by as a much as a half.
Summary of necessary
changes in relation to young driver risk
- Young
children and teenagers need ongoing, curriculum-led enhanced
educational initiatives and project work to improve knowledge and
change attitudes towards road safety and reckless driving.
- Parents
need to be engaged in that project work to improve their knowledge and
skills while nurturing a more pro-active approach to their children's
safety.
- When
sent new DVLA documents as a new keeper of a car, a road safety leaflet
with regularly changing content should be included.
- The
driving test needs to adequately assess young driver skills in
differing
road conditions.
- The
car insurance industry should trial a telematics and video monitored
graduated driver licensing model as proposed by the ABI which would
inform whether it would be a suitable policy initiative for all new
young drivers.
- From
the perspective of doing all that is possible to reduce accident risk,
the drink-drive limit for all drivers, including higher risk under-25
year olds, should be zero. Certainly, the need
for a lower drink-drive limit needs to be re-visited.
- Young
drivers should routinely use telematics car insurance to assist them to
drive safely and reduce their car insurance premium.
- ABI
should be encouraged to draw up a protocol for routine recognition of
advanced driver trianing by car insurance providers via reduced
premiums.
Summary of necessary
changes to reduce car insurance fraud
- Following
the USA model, an anti-fraud levy of £1 should be applied to all
annual car insurance policies. This would raise £28m annually to
fight fraud.
- That
money could be used to fund several new regional Insurance Fraud Units
(run according to the new London-based insurance fraud unit model) with
greatest investment in the North West and other hotspots where there is
the highest level of fraud.
- The
new levy could resource an additional car insurance fraud workforce of
around 330 deployed in around ten or more regional centres
- Some
of the additional resources could be used to increase staffing at the
Insurance Fraud Bureau, particulalry to assist in liaison with the new
regional fraud units.
- The
Association of Chief Police Officers and insurance industry
representives, including the IFB and ABI should draw up a new
'framework for co-operation' in relation to evidence sharing to ensure
that there are no barriers to intelligence gathering especially in the
context of the new anti-fraud initiatives.
- The
Ministry of Justice needs to conduct a review of current anti-fraud
legislation and penalties with a view to developing new simplified
procedures that could be used to successfully prosecute minor levels of
fraud. At present, such prosecutions are never brought. This may be a
complex task but in its absence, there is little to deter the millions
of have-a-go fraudsters.
- Thatcham
needs to finance a new medically-led whiplash research unit that draws
on best practice in other countries and conducts its own research to
develop best practice guidelines in the assessment and diagnosis of car
accident related neck injury.
- Rules
of evidence, specifically in relation to whiplash, should be strictly
adhered to, in order to
make it a requirement to prove the presence of whiplash (such that more
than just a supportive medical report would be needed) in order to
secure compensation.
Summary of necessary
changes to reduce uninsured drivers
- Automatic
seizure and destruction (or auction) of uninsured vehicles for those
car owners with previous uninsured driving offences.
- Automatic
seizure and destruction (or auction) of uninsured vehicles for those
individuals driving while banned.
- An
increase in penalty points for uninsured driving from the current 6 to
8 points to 8 to 12 points with discretionary driving bans for those
involved in accidents.
- Development
of new guidelines to improve enforcement with heftier fines and routine
car seizures.
Other Sections of this
Report:
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