MPs condemn 'dysfunctional' market

Motor insurance is a

%VIRTUAL-SkimlinksPromo%Motor insurance is a "highly dysfunctional market" in which firms' pursuit of profit has led to higher prices for consumers, a report by MPs has said.

In some cases, business practices have not been in the consumer interest and have "inadvertently encouraged criminal activity", the report from the House of Commons Transport Committee said.
There was no clearer example of this than "insurance firms' willingness to pay compensation for whiplash claims which they suspect are fraudulent without requiring the claimant to undergo a medical examination".

The committee said steps were being taken to prohibit insurers from offering to settle whiplash claims before the claimant had undergone a medical examination.

"We agree and would like to see this practice banned altogether," the committee said.

The MPs also said they agreed in principle with the Government's requiring of courts to strike out "dishonest" insurance claims where, for example, there had been gross exaggeration.

But the committee cautioned against hasty legislation "because there may be complex legal implications".

The committee also agreed with Government plans to prohibit solicitors from offering inducements, such as cash or tablet computers, to people considering making claims.

The report said progress in enabling insurers and claimant solicitors to share data about potentially fraudulent claims had been slow.

The MPs said that when data sharing began it should be compulsory, otherwise only the most reputable firms would be involved.

The report went on: "We also note evidence that new forms of potentially dishonest practice - such as ordering additional medical reports on psychological harm arising from road traffic accidents -are emerging.
"The Government should press the Solicitors Regulation Authority to stop some solicitors from playing
the system to maximise their income from unnecessary medical reports."

Launching the report, the committee's chairman Louise Ellman, Labour MP for Liverpool Riverside, said: "This is our fourth report on the cost of motor insurance and while premiums are now falling, aspects of the market remain dysfunctional and have encouraged criminality to take root.
"Further action is still required to tackle fraud whilst protecting genuine claimants."

Simon Douglas, director of AA Insurance, said: "Despite the reforms already introduced, insurers are still footing the bill for the increasing number and cost of personal injury claims, particularly whiplash, even though the number of crashes and injuries on Britain's roads continues to fall.

"This suggests that attempts at fraud are still rising, while insurers are even starting to see claims for psychological injury following even very minor collisions.

"Insurers are working hard to identify attempts at fraud and are becoming increasingly successful, as figures released earlier this year underlined, but more can be done."

James Dalton, the Association of British Insurers' head of motor insurance, said: "Motor insurers are determined to drive out unnecessary costs to ensure that customers get the best motor insurance deal.

"We are pleased the Transport Committee recognise that average motor premiums have been falling.
The ABI's premium tracker shows premiums have reduced 14% since early 2012.

"This reflects the industry passing on savings to consumers resulting from reforms introduced to address fraudulent whiplash claims. Recent announcements to tackle grossly exaggerated claims and stop solicitors offering free ipads or cash for whiplash injuries are further welcome developments. "

He went on: "A medical report for a minor injury claim produced years after a car accident adds no value whatsoever. Removing an insurer's ability to settle a claim without a medical report will only serve to increase insurers' claims costs, and consequently premiums.

"More needs to be done to sustain lower motor insurance premiums. The Government needs to press ahead with the delivery of a nationwide panel of independent and accredited experts producing medical reports in support of whiplash claims; ensure that the small claims track limit is increased to £5,000, and ask whether general damages should be awarded for whiplash injuries at all."

John Spencer, president of the Association of Personal Injury Lawyers, said: "The Government should listen to the committee's warning about avoiding hasty legislation to dismiss claims for 'fundamental dishonesty'.

"Despite the fact that it is a complex area of law, it was introduced in the Criminal Justice and Courts Bill at such a late stage in the House of Commons it had no scrutiny there at all."

He went on: "Blanket dismissal of such cases will have damaging consequences for injured people with legitimate claims for compensation. While the definition of 'fundamental dishonesty' remains unclear, injured people may find themselves spuriously accused of fraud by unscrupulous insurers.

"Embarking on a legal case can be daunting enough for injured people, but the threat of being falsely accused of overstating their suffering could lead people with genuine claims to underplay their symptoms or fail to bring cases at all. "

The cheapest cars to insure
See Gallery
MPs condemn 'dysfunctional' market

Price new: £5,995

Dacia has made a big impact in the UK with its line of affordable motors.
The Sandero is the foundation of the brand's offering and is famed for being the UK's cheapest car.

With a group two insurance classification it's also one of the cheapest cars to insure right now.
The entry level Access model is sparsely equipped, but it has a practical interior, big boot and low running costs.

Price new: £8,060

The Seat Mii is a small city car which Auto Express praises for its spacious interior, good build quality and supple ride.

All models are in insurance group one, bar the group two Sport version.
The Mii is available in three-door or five-door styles, but both measure just 3.5 metres, making it perfect for getting around town.

Price new: £8,090

The Skoda Citigo was crowned Auto Express Best City Car 2013.

The magazine praised its low running costs and practicality as well as its grown up driving experience.
Like its Mii stable mate the Citigo has group one insurance in all apart from its top specification model, making it one of the cheapest cars to insure.

Price new: £8,265

The third of the Volkswagen's group of three city cars to make the list is the Up!

Auto Express says the Up! was 'born to rule' city streets with its small dimensions and lightweight body.
There's three versions of this fun city car; Take Up! has a group one rating as does Move Up! while the higher spec High Up! gets a group two classification.

Price new: £8,345

The Hyundai i10 is another car which can get you a cheap insurance quote thanks to a group one insurance rating across all the 1.0-litre petrol models.

Auto Express says the new 2014 i10 offers big car features in a small package. And for £8,345 you also get Hyundai's five-year warranty and roadside assistance package.

Price new: £8,995

Vauxhall has managed to squeeze one of its full sized Corsas into insurance group two.
Auto Express says the 1.0-litre ecoFlex model has the lowest insurance costs of any mainstream supermini.

The eye-catching design, solid interior and big-car features make it an appealing buy for drivers.

Price new: £9,575

The Smart car caused a bit of a stir when it first appeared thanks to its dinky dimensions and bold two-seat layout, making it very useful for driving about town and absurdly easy to park.

The Smart ForTwo is the latest incarnation, which keeps to the same formula; it still has only two seats and is one of the smallest cars on the road measuring just 2.5 metres long,
The entry level 0.8- and 1.0-litre models qualify for group two insurance.

Price new: £11,810

The Peugeot Partner Tepee 1.6 VTi is the passenger version of the Partner van and according to Auto Express easily the most spacious new car that currently qualifies for a group two insurance rating.

It's got a boxy shape that provides plenty of room and has sliding doors which make it a very practical and flexible family car.

If you're after something smaller the Peugeot Bipper Tepee, which is the smallest of Peugeot's family of Tepee MPVs, also gets a group two insurance rating.


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