What goes down must come up – December 2015

What goes down must come up

Matt Currie, Regional Co-ordinator Central East and Partner at Irwin Mitchel, shares his view on the recent Autumn Statement from the Chancellor

Whilst many were expecting some move on the small claims limit in the life of this Parliament the announcement by George Osborne surely surprised everyone. The excuse for George to make the announcement in preference to those we would traditionally expect to comment was that the further reforms would reduce the cost of motor insurance for the ordinary consumer. It wasn’t about Justice or Injustice – that would be the Justice Minister. It wasn’t about Fraud – that would be the Home Secretary. It wasn’t about motoring – that would be the Transport Minister. The sole justification George will have used to gain the limelight is that it was about a better deal for consumers.

Ignoring the rather glaring fault in his own logic of the almost simultaneous increase in insurance premium tax it would appear that George doesn’t necessarily believe in the savings he’s announced. As with previous reforms he’s not entertaining the idea that his success might actually be measured. Surely if he believed it would actually be delivered he would create a mechanism to (truthfully) demonstrate the savings achieved. Perhaps George knows that the reforms won’t achieve as much as he claims.

Let’s assume that the reforms come in as described – let’s speculate on what that’s likely to mean (apart from the absence of access to justice for the ordinary man in the street) in terms of consumer “savings” and unintended consequences.

George is claiming to replace cash with care. As we saw with the rushed implementation of MedCo there are plenty who will seek to capitalise on that and there’ll be a new cohort of “rehab’” companies. There is every chance that the unit cost of rehab’ will increase and the overall cost of rehab’ to the insurance industry increases. In tandem with this we will see certain businesses now focus on driving increased revenue from repairs and replacement vehicles. The Government is doing little or nothing in this space. Cost reduction in the one area will be replaced with cost increase elsewhere.

The savings in premiums are likely to be non-existent but even worse premiums for legal expense insurance are likely to increase.

George has also forgotten the function of the system collecting cash for the CRU. Income for the exchequer will be reduced but I suspect he hasn’t mentioned this to the Department of Work & Pensions.

Similarly Court fees will inevitably reduce. Remember those Civil fees now subsidise Criminal Courts so the MOJ will need to find an alternative for funding our Criminal Justice system.

We then have the real unintended consequences – a lack of improvement in road safety. The tort system with compulsory insurance has ensured that the insurance industry has kept up pressure on motor manufacturers to innovate around car safety. Insurers have done an outstanding job in ensuring that cars and our roads are now dramatically safer than they were 40 years ago. With the removal of entitlement to compensation, the incentive for insurers funding of research and lobbying around road safety will inevitably reduce. It appears that George thinks our roads are safe enough.

So I wonder, once the reforms are implemented will George return to Parliament and confess that he’s not saved £40 – 50 per policyholder? Or will we find that the limelight passes back to the MoJ, the Home Office and Ministry of Transport?