According to a recent report from research agency Consumer Intelligence, consumer trust in insurance companies is falling. Only 68 per cent of people now say they trust their insurance company. This suggests that 32 per cent of people pay for insurance that they don’t have confidence will actually deliver what is required for them in the event of a claim. Following this report, YouGov has claimed that over two-thirds of people believe that insurers will do whatever they can to avoid paying out. These are worrying developments for us all, but particularly worrying statistics for the insurance industry. It’s hardly surprising, though, when these reports coincided with news from the Financial Conduct Authority (FCA) that it has set out a package of remedies to deal with concerns about pricing. In its damning interim report it says that six million people are paying too much for their insurance and many of these (one in three) are potentially vulnerable. The FCA, it seems, has had enough of sharp practices affecting millions of people.
It took the FCA to intervene in the insurance market in 2017 to deliver savings to consumers by forcing the insurers to improve transparency on renewal. The FCA is continuing its work to tackle inexplicably high premiums and not before time.
According to an article in the Daily Express earlier this month car drivers’ insurance premiums could be up by as much as four per cent this year. It’s familiar territory, and no surprise to those in the personal injury sector that the insurers blamed this on increasing payouts to needlessly injured people due to changes to the discount rate in England and Wales, as well as what insurers see as a failure to increase the rate in Scotland.
FOIL, the Forum of Insurance Lawyers, responded in the press to the announcement on the maintenance of the Scottish discount rate at -0.75 per cent by saying that it is likely that increased costs to insurers would have to be borne by Scottish taxpayers and policyholders. It’s an odd thing to say, since if catastrophically injured people do not receive full compensation they will run out of money later in their lives, be forced to rely on the State and the taxpayer will end up picking up the bill instead of insurers.
But trying to lay the blame at the feet of injured people in their hour of need is utterly unconvincing. The Association of British Insurers’ own data shows that vehicle repair claims ‘make up the largest chunk of claims dealt with by insurers’. In the second quarter of 2019 insurers spent £1.1 billion on settling vehicle repair claims, some £350 million more than on injury claims. Year on year the cost of vehicle repairs has increased by 7 per cent while injury claims have fallen by one per cent. Over the longer term the cost of injury claims has fallen by 21 per cent between 2013 and 2018, while vehicle repair claim costs have increased by 28 per cent.
Add to this that the changes to the discount rate in England and Wales actually saved the insurers around £300 million a year and this all starts to smell rather bad.
Why then are insurers so focussed on kicking back against legislation and regulations designed to protect injured people in their time of need? Because, one could easily conclude, they just want more for their shareholders.
As an industry, it would be well advised to consider these recent developments as a whole, accept that a functional society demands full and prompt redress for needlessly injured people and that vulnerable injured people need expert representation from PI lawyers and others in the rehabilitation arena. Many people don’t want cheap insurance, they want good value insurance that delivers what is required in their hour of need. A lack of public trust suggests this is not the case for many.
The insurers have had it their way for too long and their influence over Government decisions has been plain to see. The tide is turning back in the favour of injured people as the long-standing myths surrounding Britain’s compensation culture is revealed for the lie it is. Every day hundreds of people are needlessly injured due to no fault of their own and they deserve a caring and coordinated response in their hour of need, not to be blamed or made to feel guilty for costing the insurers more than they would like.