We are told
again and again that motor insurance premiums are too high. We are also told
that the reason for this is the number of claims being pursued by ‘no win no
fee’ lawyers and in particular claims for whiplash.
It is easy
to believe that anybody injured in a motor accident, caused by another driver,
is somehow personally responsible for high premiums. I have said before that is
mainly a myth –
But there
is barely a mention of the conduct on motor insurers themselves.
This has
been highlighted, this week, by a case where insurers have been battling
between themselves over repair costs. In a case known as Coles, Woodhead and Crowther
v Hetherton,
Guy and Thomas – RSA were taken to task by Allianz and Provident. This
concerned the RSA’s practice of using a repair company, MRNM, which is part of
their group, to do the work. This obviously saved money on the charges. But
they were charging the third parties’ insurers (in these cases Allianz and
Provident) a notional repair cost rather than the actual cost. This was based
on what it would have cost the driver to do the work rather than what they
paid. They accepted that they made money on this arrangement.
In a hearing this week the High Court approved the practice
and declared that it was entirely reasonable. Mr. Justice Cook ruled that a
reasonable repair cost is not necessarily the cost actually incurred. It is now
being predicted that in a competitive market other insurers will follow suit. This
in turn could see a 25% hike in premiums.
This comes on the back of news that the OFT are to
investigate the conduct of insurers. They are accused amongst other things of
inflating car hire and repair costs by entering into agreements with suppliers
who charge inflated amounts. They are also amongst the highest beneficiaries of
referral fees.
I hope all this will begin to set the record straight. It is
easy to blame victims of accidents for high premiums. It is even easier to blame
their lawyers who are always cheap targets! But in reality nobody expects the
insurance industry give us all a rebate if claims are reduced.
Premiums are too high. But the way they are charged is a
very complex web.
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