Motor insurer LV= released a trading statement for 2013 indicating that it made an £89,000 loss on its car insurance, despite the increasing number of customers taking out policies. LV= has predicted that the cost of premiums will rise again in 2014. Mike Rogers from the company said “the market as a whole was down by about 12 or 13 per cent so I don’t expect it to exceed that, but 5 or 6 per cent would be a sensible concern”.
This has prompted some discussion in respect of the recent reforms of the way personal injury claims are handled. The Association of British Insurers (ABI) successfully argued that implementing reforms would reduce the number of exaggerated and fraudulent claims and this reduction in compensation claims would result in lower car insurance premiums. Last year the Ministry of Justice (MOJ) announced that we were starting to see the impact of the recent reforms and premiums were beginning to fall.
The ABI has said that the falling premiums show the industry’s commitment to pass on savings to policyholders as a result of the reforms. However, LV= predicts that premiums will start to rise again in 2014 and so it appears that the insurance industry has overestimated the impact of reducing exaggerated and fraudulent claims.
The ABI continues to push to further legal reforms to reduce the number of exaggerated and fraudulent claims and whilst the number of road traffic accident compensation claims has reduced since the legal reforms were implemented, we are yet to see any significant impact on premiums, and the Government should first consider why premiums are set to rise again before implementing further reform.