MSE News: Third party car insurance could soon be dead

dunstonh

huckster wrote: »

I think the time has come for the government to look at Car Insurance ,perhaps working with the industry/regulators to come up with a system of third party cover that is provided with the tax disc. The government would then cover the risk and perhaps be more responsible in looking at risk issues. e.g young/experienced drivers having green P plates for say the first 3 years of driving, with restrictions on engine sizes they are allowed to drive, improvements to way people learn to drive with more education, legislation to limit/control personal injury claims. ( I doubt given the amount of government debt that they would be interested in this, but I think it should be looked at)

Given the losses many Insurers are experiencing, I doubt that they would lose sleep, if governement took the risk on. Insurers could still sell top up Insurance to cover the cars themselves, which most people would choose to do so.

The problem is that the car insurance underwriting is generally loss making. So, do we really want taxes to rise to pay for that shortfall? Also, Govt tends to be much more inefficient at delivering things that the private sector can. So, chances are it would cost more and again, that means a tax increase.

A more realistic review would see that until recently, car insurance was, for most people, at the lowest it has been in real terms. The credit crunch led to an aversion to risk has seen low risk people/areas see little or no change in premium levels but higher risk areas/people rise significantly. So, unless you force risk to be viewed differently there isnt going to be a realistic change until a) you cut back on fraud (not discussed here but a key issue) and b) the re-assurers are more interested in pricing risk more competitively.

If you force risk to be priced differently, all you will achieve is lowering the premiums of some whilst the difference is passed onto others in an increase. That brings a different level of unfairness as those less likely to claim would be penalised.

Personally, i don't think there is any solution as far as risk pricing is concerned. I think you need to look at fraud and penalise that to a level to make it a deterrent. If the higher risk areas can be made less risky, that would help.

raskazz

Arg wrote: »

A report? You mean where insurers were given an easy ride to parrot their excuses? "Oh no it's not our fault, it's all the nasty people claiming whiplash".

Have you actually read any of it? I've read all 124 pages of Volume I and I do not recognise your version of events.

I'm also not sure why you say that issues around personal injury claims are an "excuse". Are you trying to suggest that personal injury and associated issues eg claims farming and fraud is not a significant contributory factor in the increasing cost of motor insurance? If not, I'd love to see the evidence which has led you to assume such a position.

mikey72

dunstonh wrote: »

The problem is that the car insurance underwriting is generally loss making. So, do we really want taxes to rise to pay for that shortfall? Also, Govt tends to be much more inefficient at delivering things that the private sector can. So, chances are it would cost more and again, that means a tax increase.

A more realistic review would see that until recently, car insurance was, for most people, at the lowest it has been in real terms. The credit crunch led to an aversion to risk has seen low risk people/areas see little or no change in premium levels but higher risk areas/people rise significantly. So, unless you force risk to be viewed differently there isnt going to be a realistic change until a) you cut back on fraud (not discussed here but a key issue) and b) the re-assurers are more interested in pricing risk more competitively.

If you force risk to be priced differently, all you will achieve is lowering the premiums of some whilst the difference is passed onto others in an increase. That brings a different level of unfairness as those less likely to claim would be penalised.

Personally, i don't think there is any solution as far as risk pricing is concerned. I think you need to look at fraud and penalise that to a level to make it a deterrent. If the higher risk areas can be made less risky, that would help.

I think from some of the posts on here, yes, we do want it.
Insurance has been loss making for years - so why do you want to keep it so badly?
If the insurers haven't been able to make money for so many years, either they have been making profits elsewhere, and we've been paying there instead, or they just really like us. (Or they have so much money they can sustain such a loss year on year without going bankrupt)
So if we assume the first, we've been paying somewhere else anyway.
So maybe it is time to give someone else a chance.

Arg

raskazz wrote: »

Have you actually read any of it? I've read all 124 pages of Volume I and I do not recognise your version of events.

I'm also not sure why you say that issues around personal injury claims are an "excuse". Are you trying to suggest that personal injury and associated issues eg claims farming and fraud is not a significant contributory factor in the increasing cost of motor insurance?

Who knows but it's a pretty good excuse to hide behind.

dacouch wrote: »

Unfortunately in that position, a large majority of people would be tempted to put in a claim for the vehicle being stolen so they can get some money. It's why Insurers generally have a limit on the value of vehicles they insure for Third Party Twist and Bust which is typically relatively low eg £3000 to £5000.

TPF&T policies have an amazingly high percentage of theft and even fire claims in relation to comprehensive policies

I wonder how much plain third party is? By all accounts it should be vastly cheaper,I bet it's not.

property.advert

Premier wrote: »

The product will only die if there is no more demand for it.

It's not just young and/or inexperienced drivers that may find fully comp. cheaper, and I'm not going to complain that the insurers in their fight amongst themselves now offer me fully comp. cheaper than TP. I only want TPF&T, but if they offer me fully comp at a cheaper rate, why wouldn't I take it?

There will be no demand for a product if one can buy a better product for less money.

Similar thing could be said about the 1/2lb (or 250g) of butter - that could soon be dead.
I only want 1/2lb of butter as any more goes off before I get to eating it all. But in most supermarkets today I find I can buy 1lb (or 500g) of butter cheaper than the same brand of 1/2lb.
So I buy the bigger pack and throw half of it away when it goes off.

Why don't you just freeze the butter you don't want ?

raskazz

Arg wrote: »

Who knows but it's a pretty good excuse to hide behind.

So in other words, you don't have the foggiest so rather than take a few moments to review some rudimentary literature on the topic, you thought you'd just spout a load of unsubstantiated nonsense? Good idea.

mikey72

raskazz wrote: »

So in other words, you don't have the foggiest so rather than take a few moments to review some rudimentary literature on the topic, you thought you'd just spout a load of unsubstantiated nonsense? Good idea.

Apart from your word on it, I'd be interested to see the actual facts and figures on the costs of personal injury claims, as you keep stating it's a significant cost, but I'd never actually seen a figure, or any links to them?
Just curious on the numbers, compared to number of vehicles insured, average policy cost etc.

raskazz

mikey72 wrote: »

Apart from your word on it, I'd be interested to see the actual facts and figures on the costs of personal injury claims, as you keep stating it's a significant cost, but I'd never actually seen a figure, or any links to them?
Just curious on the numbers, compared to number of vehicles insured, average policy cost etc.

Plenty of data in the report - see the written evidence from page Ev43 onwards.

http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtran/591/591.pdf

mikey72

raskazz wrote: »

Plenty of data in the report - see the written evidence from page Ev43 onwards.

http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtran/591/591.pdf

I wish my data needed to be so accurate.

There appears to be a lot of "estimates" and data solely from insurance representatives, with no actual source for the figures, and no mention of the practices they are complaining about (credit hire referral, claim management, personal injury referral), actually being made mainly by them, to generate commission. It appears to be them saying "stop everyone else doing it", but we'll carry on thanks.


Are there any facts anywhere in it?

"Although the ABI has not collected statistics on the proportion of total motor insurance claims costs that arise from bodily injury claims, feedback from members and EMB suggests that the cost of BI claims as a proportion of total motor insurance claims has more than doubled in the last 20ears and now accounts for around half of all motor claims costs."

"ABI estimates that 10% of every motor insurance premium is going to the legal profession."

"We estimate that in 2009, £930 million of motor insurance fraud went undetected, adding £39 to the cost of every motor premium."

raskazz

mikey72 wrote: »

I wish my data needed to be so accurate.

There appears to be a lot of "estimates" and data solely from insurance representatives, with no actual source for the figures, and no mention of the practices they are complaining about (credit hire referral, claim management, personal injury referral), actually being made mainly by them, to generate commission. It appears to be them saying "stop everyone else doing it", but we'll carry on thanks.


Are there any facts anywhere in it?

"Although the ABI has not collected statistics on the proportion of total motor insurance claims costs that arise from bodily injury claims, feedback from members and EMB suggests that the cost of BI claims as a proportion of total motor insurance claims has more than doubled in the last 20ears and now accounts for around half of all motor claims costs."

"ABI estimates that 10% of every motor insurance premium is going to the legal profession."

"We estimate that in 2009, £930 million of motor insurance fraud went undetected, adding £39 to the cost of every motor premium."

Have you asked yourself why data for 2009 and 2010 would be based on estimates at this point in time (albeit estimates using sophisticated actuarial techniques)? Have you heard of such terms as reserving, IBNR and RITC? If so, the reason would be pretty obvious.

Clearly, firm level data on such issues will not be in the public domain as it is commercially sensitive information. Hence why the report will rely on data collated by various relevant bodies - ie the ABI, Towers Watson, Lloyds, CRU etc.

If you actually read the whole report - no offence but I don't believe that anyone can read and comprehend over 120 A4 pages in 28 minutes - you will see that the issue of claims referral fees is fully explored.