This article first appeared in Modern Insurance Magazine, Issue 38
The wonderous abilities of insurers never fail to impress. Almost a year before implementation of the Civil Liability Act and the whiplash reforms and lo and behold, a spate of headlines appear proclaiming that premiums have fallen due to the reforms. Doubly miraculous given that the average claim takes 12 months to resolve. If there are indeed any savings to come, logic would dictate that they would not start filtering through the system until 2021, but insurers have spectacularly pulled savings out of the bag a whole two years before they are realised. Bless them.
The reality is that this recent dip has absolutely nothing to do with the reforms and it is an insult to our intelligence to claim otherwise. There are many influences upon premiums including competitive pressures, cyclical trends, loss leading versus other forms of insurance, repair bills and taxes such as the Insurance Premium Tax, but that won’t stop insurers from inevitably pinning the blame on legal costs. Even though legal costs have been falling for over ten years, having been fixed for RTA cases in 2003, revised downwards in 2010 and falling again by 60% following the LASPO cost reforms,
Of course, as was starkly emphasised in the Treasury’s recent consultation on the new statutory requirements for premium information on insurers, we won’t find out the truth about any savings from the reforms until way off into the distance, around 2024/25. Between now and then, there will be all sorts of opportunities for further “adjustments” and new narratives apportioning blame. The ABI’s James Dalton was undoubtedly being honest when he told the Justice Committee in 2017 that “premiums will not go up as much if these personal injury reforms are implemented.”
Many of us will remain deeply sceptical about the commitment made to return savings to customers. The sector has a poor historical record on passing on sustained savings through lower premiums. When costs are supposedly taken out of the system, it is not a one-off event but taken out for good, year on year. The time for Government and regulators to act and genuinely hold insurers to account is long overdue. Consumers shouldn’t have to wait until the mid-2020s before the issue is considered again.