Insurers are reporting a fall in motor premiums citing reforms that have yet to come into force.

It’s a revolutionary breakthrough! Insurers have closely watched Back to the Future and must have found the secret to time travel because they are reporting a fall in premiums thanks to legislation that has yet to come into force.

The Association of British Insurers (ABI) claims that the average price paid for motor insurance has fallen by £15 in the first quarter of 2019. The organisation claims that insurers are passing on savings from the Civil Liability Act which will not come into force until next year.

We have seen these claims before. In 2013 the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) provided enormous benefits to insurance companies who promised that customers will be positively impacted by the changes. Initially premiums dropped below £390, but over 4 years they rose over 20%, reaching an average premium of £500.

Organisations like Access to Justice (A2J) argued that the Civil Liability Act will mimic what we saw with LASPO. While insurers claimed that customers will see a £35 drop in premiums (a drop from £50 which they initially claimed), A2J argued that it would be much closer to £16.

Under the Civil Liability Act, insurers are mean to provide information to the Financial Conduct Authority (FCA) from November 2023, showing whether or not any savings have been passed on.

Our assessment of the Civil Liability Act in December revealed vast majority of road traffic victims will not bother to claim for their injuries. Those that do go through the new process will likely under settle significant claims without appreciating the implications of full and final settlement.

Ralli Director James Reilly argues: “The reforms of 2013 unquestionably passed on huge savings to the insurance industry. In the last few years the number of reported claims to the DWP has dropped significantly yet consumers have not seen a commensurate drop in premiums. Insurers have only partially passed on these savings which were gradually eroded with hikes in premiums but what is often overlooked is the complicit involvement of the Government who have doubled insurance premium tax from 6% to 12%. In order to excuse further increases in premiums and IPT it has become standard practice to scapegoat the injured and in particular claims management companies and by association lawyers.”

He continued: “The campaign on claims in the media by the ABI and the government was an assault on consumer rights and protection. The planned reforms will have a very detrimental effect on the vast majority of RTA claims and despite promises from insurers and government to create a consumer friendly system, the reality is that most predict the number of people pursuing claims will diminish because it will not be worth the effort.”

“There is very little prospect in the long term of the savings being passed on to the consumer whilst premiums and tax rates remain high. There may be some token reductions in the short term for favourable headlines but in due course I strongly expect the ABI will find another cause to complain about those who have the temerity to claim especially whilst they have the ear of a Government who are so ready to hear their concerns,”  James Reilly concluded. 

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