MSE News: Car insurance cost hope after fees ban

davidgmmafan

This

"I predict that car insurance costs will continue to go up as before with the only difference being an increase in insurance companies profits."

Though I would love to be optimistic I think we're about to find out the insurance companies were bluffing about this... I am somewhat skeptical as the same companies blaming these fees for the increase in costs were also involved in the practice.

"wonder what the government's cut is?"

I think insurance premium tax is 6% now up from 5%? So like energy bills there's not a vast incentive to tackle it as the government gets that cut of whatever it is. Of course there are other issues coming into play like people dying or gambling that they may not get caught if they don't insure... And if they do the 'penalty' can be derisory compared to the cost of doing it legitimately.

thor

The insurance companies have become accustomed to being able to increase premiums at an alarmingly high rate and they will be loathe to see this slow down. Once referral fees are gone you watch insurers start whingeing about a whole host of other excuses which their apologists will latch onto to tell us that we must pay 40% extra year in year out. If they are struggling so much, how is it that only a handful have gone to the wall? Just look at the huge number of insurance companies out there, when I first began to drive over 20 odd years ago there were nowhere near as many. Also don't me give that 'the car part of the insurance is being subsidized by the rest of the business' malarkey. If that was the case why bother keeping a loss making part of the business at all!

naomiwilson

I work as a personal injury solicitor in this field and I can confidently say that removing referral fees will have no effect whatsoever in my opinion on the cost of car insurance. There are multitude of factors affecting premiums from recent other problems on the insurers books (riots? floods? they have to spread the risk). The legal costs have been fixed in road traffic claims since April 2010 at a level that was agreed between insurers and lawyers and costs have gone down yet insurance is going up. As referral fees are part of those fees agreed they do not impact upon the cost of motor insurance and before anyone jumps on fraudulent claims, the cost of those per year is actually a very small percentage of the overall amount spent on insurance in this country. A headline of something saying "fraud costs the insurance industry £3 million pounds a year" (or whatever random figure they are trotting out this week) looks shocking until you realise that we actually purchase policies in the amount of BILLIONS in this country. In the [FONT=&quot]2008 Association of British Insurer’s published paper ‘Tackling Whiplash: Care, Prevention, Compensation,’ the finding was that “Vehicle bodies have become stiffer since the late 1980s, increasing crashworthiness in high-speed rear-end crashes. This helps reduce the incidence of serious injuries, but may increase the incidence of whiplash, due to higher relative transfer of energy in a crash.” This (insurance requested) report has been convenently ignored since it's publication when considering the point of the number of injury claims. The public need to understand that with the advent of the Legal Services Act, non lawyers can own law firms within the next few months. At the moment insurers charge the highest referral fees in the industry from their panel solicitors. Does anybody not consider it a coincidence that all of a sudden they are the hot potato just as insurers can open a law firm and see off the (fully trained and qualified) competition's marketing budget in one fell swoop? And given that there are very few insurers now - they just operate under various trading styles - what happens to independent legal advice? When you need help, do you want to be put on a conveyor belt and treated like a tin of beans? This government does not believe that the British public are entitled to fair representation. And don't forget that hand in hand with this hoo ha about referral fees goes the introduction of having to pay part of your own legal fees when you do need to make a claim. As Claimant laywers we genuinely want to see the industry cleaned up and any fraud stamped out but first the insurers need to take a long good look at themselves. We frequently ask for information early on and are met with a blanket refusal or often just silence. Their staff are usually untrained and unco-operative and many cases that should be settled end up going to Court. In the last few months we have been asked to assist insurance staff who havent had any training and are asking our advice, we have been asked "what's a County Court?" and dont even get me started on the staff from a certain insurer, one of the biggest players, who are based out of the country and have no idea what we are talking about. It would be nice if someone paid attention to our side of the story and the public appreciated what a precipice we are standing on the edge of but sadly I think lawyer bashing and scandalous headlines are much more the name of the game. [/FONT]

JulieTwist

I am a Partner in Coyne Learmonth and some of you may have seen Tony Learmonth on the recent Panorama Programme on this issue. The point he tried to make was this, the lawyers fees are fixed and if the insurer admits liability early and follows the protocol laid down then the lawyers costs are fixed at a modest level. The losing insurer pays the same fixed fee whether or not the lawyer has paid a referral fee. Please do the maths. How is it that this puts up the cost of motor insurance if the lawyers fees are fixed? The only reason the insurers pays more is that they fight a bad cause or fail to deal with things in a timely manner and it's not the loser that pays as the lawyer pays out of his pocket. If the lawyer did not pay a referral fee he'd have to have a marketing budget and how much would that costs him per case? The answer is about the same as a referral fee. The only lawyers who are paying £1000 a case as reported in the media are those law firms that take work that the insurers themselves are selling. When ABS structures come into being early next year the insurers will own those law firms and won't be bothered about the income the referral fees currently generate for them The rising cost of motor insurance is down lots of factors but mainly to insurer inefficiency as was seen in that programme. It cost the insurer £6000 more than it should have done had they bothered to come to court or make an offer to settle before proceedings were issued.

If recoverability of a success fee on a no win/ no fee agreement were banned then imagine you are too poor to pay for comprehensive insurance on the car you needed for work and you were involved in accident that was not your fault. Would you be happy if you had to pay 25% of your money for your car that was written off to the lawyer? You would not be able to replace your car with the money you got because some of it would be going to pay your lawyer and it was not your fault. If the law says that the person who causes you harm should put you back into the position that you were in before the accident how can that mean that you should be 25% worse off ? Think it through and lobby your MP :A

mikey72

At least you made two paragraphs, but it was still outside my attention span I'm afraid.

Pendle_Gazza

mikey72 wrote: »

At least you made two paragraphs, but it was still outside my attention span I'm afraid.

LOL, yeah. It's a poor do when even solicitors can't be bothered to layout their information correctly.

mikey72

Must be a common failing, as both newbies first posts seem to be an identical style.

naomiwilson

I'm sorry for the font / paragraph problem.

As you will see I did try to edit it but it wouldn't take for some reason.

It's a shame that the last few posters don't seem interested in the real reason why car insurance prices are the amount they are as if you did know what really goes on you would be quite shocked.

I was also filmed for the Panorama programme and we went into great detail as to the causes of the increase, insurer behaviour dealing with claims and the new Road Traffic Claim system however it wasnt considered grabbing enough and they only showed the fraudulent claims company (who were quite rightly brought to justice). If fraud is such a massive problem, why doesn't the government have a specialist task force?

The media thinks that the British people are a bunch of ignorant morons who believe any old headline they are presented with and will automatically believe it's the ambulance chasing lawyers fault.

I would hope that people do read the post I have left and the other post below mine with an open mind and consider all the facts before making a judgment otherwise it's just playing right into the media's hands.

I'm not saying referral fees are right or wrong, I'm just saying that there is a much bigger picture here and people need to have all the facts to make an informed decision.

Anyone who thinks the insurers getting a bigger share of the pie given that most of them keep their money offshore is clearly bonkers. It is not in the interest of the British economy to do this never mind all the offshoring of jobs in insurers that the government has allowed which has contributed both to the problems in the claims system and unemployment. Offshoring should be banned in my opinion but now we're getting into another topic of debate......

mikey72

naomiwilson wrote: »

.......Anyone who thinks the insurers getting a bigger share of the pie given that most of them keep their money offshore is clearly bonkers.....

Is that a legal term?
Because it's not a persuasive conclusion.

Spiderham

mikey72 wrote: »

naomiwilson wrote: »

.......Anyone who thinks the insurers getting a bigger share of the pie given that most of them keep their money offshore is clearly bonkers.....

Is that a legal term?
Because it's not a persuasive conclusion.

I think that was meant to say government not insurer, makes sense then.

naomiwilson wrote: »

If fraud is such a massive problem, why doesn't the government have a specialist task force?

On this note, the City of London police are launching a new fraud unit, partially funded by the insurance industry to do exactly this.

http://www.cityoflondon.police.uk/CityPolice/Media/News/120711-policeinsurancejoinforces.htm

I can also tell you from experience that insurers are really hotting up their fraud detection and trying to be more sophisticated with it. We're finally getting a coherent response from the industry, which is nice. One of the big problems has been the fear of information sharing, both from a competitive view and also ensuring that there was no view of a cartel.