Insures that do not pass on savings from the Civil Liability Bill to consumers will find themselves uncompetitive and at risk of losing their market share, says Jonathan Guy of First Central Group
As the Civil Liability Bill continues its journey through parliament, a recent amendment revealed that insurers will be required to report detailed savings to the Financial Conduct Authority. Although a parliamentary committee debate voted against a clause enforcing insurers to pass on savings from the bill to consumers, recent developments will benefit honest drivers and insurers alike.
What is the Civil Liability Bill?
In an attempt to address the ‘crash for cash’ culture that has emerged in the UK over recent years, the government is developing the Civil Liability Bill. Currently, it is estimated that fraudulent claims result in around £35 being added to the average insurance policy, with the majority of law-abiding drivers paying the price for a small (but growing) number of duplicitous claimants. The bill aims to make it more difficult to make a dishonest claim, revisiting the way damages are rewarded and moving to a prescribed tariff-based approach.
Driving down premiums
According to Consumer Intelligence, the market reached a low point in 2014, with prices rising steadily until the end of last year, largely due to claims inflation, increasing costs of third-party claims, tougher solvency regulations and reduced underwriting capacity. But the price of rise and fall of premiums tends to go in cycles, and we have recently seen a drop of around 8% so far in 2018.
The good news for drivers is that the Civil Liability Bill should lead to a fairer system with lower premiums for the majority of motorists. Increasing the small claims track limit to £5,000 for road traffic accident claims will mean that claimants will not be able to recover legal costs for the majority of minor injuries, but the new approach will be supported by medical evidence and therefore the need to employ legal professionals to support claiming is likely to be made redundant anyway. Removing the legal cost element and validating the claim through medical evidence should, in turn, reduce claims farming and fraud, both from individuals and organised criminals.
Passing on the benefits
While the proposed amendment to enforce the passing on of whiplash reform savings was not adopted, we’re confident that consumers will still see the benefits. We’re one of a number of insurers to commit to distributing the savings back to our customers, and it’s likely that those who do not do the same will find themselves uncompetitive and at risk of losing their market share. In this way, the market will effectively self-regulate and pass savings on to customers.
Insurance is one of the most competitive markets in the world and the bill could level the field on a substantial cost line, moving competition into other areas. Again, this is good news for consumers, increasing the need for insurers to improve products and deliver the best possible customer service to gain an edge over their competitors.
Technology will support the new process, enabling consumers to access a government portal to make a claim directly. It has been designed to make the claims journey simple for consumers, who won’t need legal training to navigate the new system.
The road to a fairer future
A crackdown on whiplash claims is long overdue and therefore the Civil Liability Bill will be welcomed with open arms by the majority of drivers and consumers. While recent delays are frustrating, it is important that developments, such as the most recent amendment, are considered and fit for the rapidly evolving automotive sector. We look forward to subsequent developments and a fairer future for all.
Jonathan Guy (pictured) is chief claims officer at First Central Group