The report, commissioned by A2J and produced by Capital Economics, has countered the insurance industry’s argument that whiplash claims are directly responsible for rises in motor insurance and that claims have risen despite a drop in accident frequency.
Using data from the Association of British Insurers (ABI), the report concludes that the total amount paid out by insurers for whiplash claims fell by 17% between 2007 and 2016. During the same period, there has been a 72% increase in the cost of car insurance.
A2J has said that the report also debunks a common perception that while road traffic accidents have fallen, the number of injury claims has risen. Capital Economics found that the fall in motor accidents recorded by the police reflects the reduced likelihood of an incident being reported, rather than a reduction in total accidents. A key contributing factor in the drop in reported accidents is the decline in the number of police traffic officers – by nearly 37% between 2003 and 2014.
Mark Pragnell of Capital Economics, who wrote the report, explained that the research also provides evidence, for the first time, that motor premiums have risen because insurers’ investment returns (the money they make from investing the premium income from customers) fell rapidly after the financial crash in 2008. “The research shows a direct correlation between premiums rising after 2008, and a reduction in investment returns,” he said.
He added: “If insurers hadn’t increased their premiums, their profits would have slumped and they would have been forced to cut their dividend payouts.”
A2J spokesperson Andrew Twambley said: “The cold hard truth is that insurers have been squeezing their customers for price increases for years, and then accusing many of those self-same customers of being frauds or chancers if they have the temerity to make a claim.”
Twambley, who said the report has been sent to Ministers at the Ministry of Justice (MoJ) added: “We call on the Government to see the ABI’s campaign to ban personal injury claims for what it really is, an attempt to hoodwink ministers into helping insurers shore up their profits by taking away ordinary peoples’ rights.”
Twambley said the report also cast strong doubt on the likelihood of customers benefiting from any savings. Capital Economics has calculated that the reforms are likely to boost insurer profits by £700m each year. Twambley said: “Only two insurers, LV= and Aviva, have said they will pass on savings and even those two insurers have not explained how they plan to do so in a way that is transparent to their customers.”
In light of the report’s findings, Twambley called on the MoJ and the ABI to throw its weight behind moves to find a better way to tackle whiplash claim fraud.
“The MoJ should stop attacking injured people and instead help us remove rogue claims companies and cold callers,” he said.
“The public says cold calling is making their lives a misery and, like them, A2J wants to see the back of it.”
“We call on the Government to take account of this new evidence, tear up this initiative, which is in any case a hangover from the Cameron and Osborne administration, and sponsor a cross industry plan to deliver a workable alternative claims framework.”
A2J’s Alternative Claims Framework (ACF) can be viewed here.