Before July’s general election, the-then Shadow Transport Secretary, Louise Haigh, said that the UK’s drivers were being “punished by the out-of-control cost of cover.”
Many of us, on opening our renewal quotes for motor or indeed home insurance in recent years may indeed have been taken aback by the soaring prices. The question is whether these are fair, let alone ’out of control.’
The answer lies in what Haigh herself suggested, which is to ask the Financial Conduct Authority (FCA) and the Competition and Markets Authority (CMA) to look into this.
An investigation should not be feared by the insurance industry, but rather seen as an opportunity to clear the air and regain some of the trust it has lost in recent years, with recent Which? analysis suggesting this is at its lowest point ever.
The Association of Consumer Support Organisations (ACSO) has written to Louise Haigh, now safely ensconced at the Department for Transport, to suggest she proceeds with her previous proposal, and for the following reasons:
- Cost of cover: this has shot up in recent years, yet insurers still claim underwriting losses. An investigation would show whether the external factors such increases are usually blamed on, including repair costs and personal injury claims, really do explain matters. Given that motor insurance is compulsory, consumers need to know whether they are getting a fair deal.
- Quality of product: complaints to the Financial Ombudsman Service are at record levels, and fears over the loss of no-claims bonuses and high future premium prices mean many go out of their way not to use the product they are paying such high prices for. The FCA itself says claims costs are down, suggesting fewer claims are being made. So are consumers getting less for more?
- Claims numbers: personal injury claims numbers are down sharply, but it is unclear whether any of the savings from this are being passed on. The FCA’s analysis of the government’s whiplash reforms should be part of the wider investigation.
- Uninsured drivers: record costs means many drivers are going uninsured or underinsured. This means higher costs for the rest of us, and is something the government should be seen to be addressing.
A full, independent investigation would provide the reassurance consumers need that there is an explanation for higher costs and what looks like deteriorating utility of motor insurance. If there is no explanation, the FCA and CMA could set out what the industry needs to do to win back the confidence lost in it.
ACSO looks forward to the new Transport Secretary’s response.