Car Insurance

Monday 5th March 2018 Westminster Hall

[Philip Davies in the Chair]

18:04

[Susan Elan Jones (Clwyd South) (Lab)]

I beg to move,

That this House has considered e-petition 207616 relating to changes to car insurance.

It is a great pleasure to serve under your chairmanship, Mr Davies.

The petition asks for insurance to be based on the car itself, instead of on the individuals who drive it. The petition reads:

“In some countries, such as America and Portugal, insurance is based on vehicle itself instead of being based on the individual who drives it. This is an effective method for families and friends as they are able to share a car without paying for multiple insurances.”

The petition then gives as an example the following scenario:

“3 friends go on a night out in the same car, they all have driving licenses, but only one of them is insured on the car. 2 of them are under the influence of alcohol and incapable of driving, including the car owner. If the car was insured on itself, the sober friend could drive it legally. However, because each individual is insured on the car, no one would be able to drive it as it would be illegal.”

As of this morning, 56,200 people had signed the petition. On behalf of the House of Commons Petitions Committee, I thank Rita Rocha Vidrago, the creator of the petition, and all of its signatories. Observers of the work of the Petitions Committee—I hope there are many around—will note that that falls short of the 100,000-plus signatories that many of the petitions that our Committee schedules for debate receive. However, the number of signatories to this petition is still significant, especially as it proposes quite a specialist solution to a range of problems relating to car insurance. There are certainly enough issues relating to car insurance.

The issue raised specifically in the petition is the cost of car insurance, but there is also the related issue of drivers who drive while uninsured. I believe that the petition provides a serious attempt to deal with that critical issue—a problem that is a nightmare to all who have ever been in an accident involving an uninsured driver.

The Government have responded to the petition, with the Department for Transport stating:

“The Government has no plans to change the motor insurance system to require vehicles themselves, rather than the use of a vehicle, to be insured.”

The Government are pretty trenchant in their response—in fact, very trenchant:

“There are a variety of approaches to motor insurance taken around the world, and the UK Government is not alone in requiring the use of a vehicle to be insured.

The current motor insurance system of insuring individual drivers, rather than cars, does not prevent named drivers from being added to an insurance policy for shorter or longer periods of time. This allows for friends or relatives who share a car to be included on one insurance policy.

The price of insurance depends on a range of factors, including many which are specific to the person driving; for example, driving history (whether the driver has had previous claims or unspent convictions for drink driving, for example), the use they make of the vehicle (for example, for commuting or business use), and their years of driving experience.

If insurers had to cover the vehicle itself and were not able to take driver-specific factors into account in their pricing, then the cost of insurance would likely rise for those with a good driving record and history of driving safely.”

That is the Government’s response, which I hope we will hear the Minister develop later.

That all gives rise to the question: how much further in-depth consideration should we grant the petition? To my mind, there are three key issues in respect of motor vehicles and insurance. First, how does the proposal impact on the cost to the consumer purchasing the insurance? Secondly, does it help people in the unfortunate situation of being injured by another party? That relates specifically to individuals driving without insurance. While the guilty party may be punished through the law, that rarely helps the innocent party with their car repair costs. Finally, and vitally, does the policy help or hinder road safety? I will not go through those questions in sequence in this debate, but they are worthy of our consideration.

To move on to evidence-based research, the Association of British Insurers found that on average, young drivers spend about 10% of their salaries on insuring their cars. It is therefore clear that action needs to be taken to stem rising motor insurance premiums. Analysis by the Association of British Insurers shows that drivers aged between 18 and 21 are paying an average of £973 for comprehensive car cover. Rising motor insurance bills, resulting from a range of factors including the way in which compensation payouts are calculated and a resurgence in whiplash-style claims, are hitting younger drivers hardest.

There have been many concerns about the car insurance industry, and the integrity of the market has been questioned. As a result of complaints about the sector, the Competition Commission investigated and concluded in 2013 that there were

“features of the UK market for motor insurance and related goods or services that, either alone or in combination, prevent, restrict or distort competition such that there are adverse effects on competition.”

A research paper by the House of Commons Library about the motor insurance industry notes that many people consider the UK car insurance market to be dysfunctional. The paper cites the unpredictable rise and fall of insurance premiums. The research also references the relationship between the industry and car hire, repair and legal claims firms, which some view with suspicion.

I understand the frustration of the petitioner and the many signatories at high car insurance premiums and what could be viewed as the inflexibility of the UK insurance market. A different system—one that means that if a car is insured, anyone with a valid driving licence can drive it—certainly seems to offer one solution to the UK’s sometimes complicated and expensive system, but let me consider that further.

The cost of insuring a car is calculated using a variety of factors. Driver-specific factors include the driver’s age and experience, their road safety history, where they use and keep the car, and how often they use it. Since December 2012, car insurance companies can no longer discriminate on the basis of gender. Factors that depend on the car itself include its power and value. Insurance companies seek to set premium rates such that total premium income at least matches the total amount paid out in claims. Under that system, the people deemed the least likely to have an accident and to claim on their insurance pay the least, while those considered at greatest risk of making an insurance claim pay the highest premiums.

If insurance followed the car, rather than the driver, key driver-specific factors used to calculate risks could not be used. That could mean that drivers with a history of driving safely would have to pay higher premiums. That would be likely, as insurance companies would be unable to recover the costs of paying out claims by charging the drivers at greatest risk. It could give rise to an unfair and expensive system that would not reward safe drivers at all.

The petition states that if insurance was on the car alone and was not driver-specific, friends and family would be able to share a car

“without paying for multiple insurances.”

In reality, is that not de facto the case under the current motor insurance system? Named drivers can be added to insurance policies, allowing more than one person to be insured to drive the same car. The main driver uses the car most frequently, while named drivers use it less—none the less, they can use it frequently. That great oracle beloved of so many, the price comparison website MoneySuperMarket.com, has research showing that 35% of young drivers who are the main driver on their own insurance have a named driver on their insurance, thereby making their premiums up to 13% cheaper.

Car hire firms work on the basis that a car is insured such that anyone can use it. Many business fleets are insured on a similar basis. However, in both cases there will be a variety of restrictions. Hire cars are often only available to those over 25. While fleet operators have extensive bargaining power, there will still be restrictions: the person driving a business car will, for instance, usually have to be over a certain age and an employee of the firm.

Under some fully comprehensive driving insurance policies, one’s own insurance means that it is possible to drive someone else’s car—with their permission, naturally. However, restrictions are often placed on that type of benefit. When driving a car that is not one’s own, cover is often on a third-party basis, so insurance will pay only for damage to other vehicles or property. Another possible type of insurance is for temporary cover on another person’s vehicle.

The petition cites the USA and Portugal as countries with a motor insurance system that requires insurance only of the car and not the driver. Such a principle is out there, and it is good to examine, and sometimes to copy, effective working practices from other countries. I certainly believe that that is worth doing here; however, I strike a note of caution, because on closer inspection the motor insurance model in both those countries is more complicated than it first appears.

In the United States of America, liability insurance follows the driver and covers them when they drive a vehicle other than their own. All states apart from New Hampshire require at least liability insurance. Comprehensive and collision auto insurance are tied to the vehicle; however, if someone other than the insured drives a vehicle covered by comprehensive insurance and is not listed as a covered driver, they may not be covered in an accident.

In Portugal, the vehicle and not the individual is insured; however, vehicles are generally insured to be driven by specific categories of driver. For example, if a car were insured for a category of drivers aged over 45, a sober driver aged under 45 would not be eligible to drive it. In Portugal, it is possible to insure a car with comprehensive cover for any driver. In practice, however, the driver often has to be over 30. Research from the Library suggests that comprehensive cover can be harder to get in Portugal than in the UK.

Driving without insurance in the UK is illegal—and quite right, too. Even if our model of insurance changed, I have no doubt that driving without insurance would remain illegal. The police can give a fixed penalty of £300 and six penalty points to someone caught driving a vehicle that they are not insured to drive. If the case goes to court, the uninsured driver can be made to pay an unlimited fine and be disqualified from driving.

The police also have the power to seize and, in some cases, destroy the vehicle that is being driven uninsured. There is a strong case for that practice. It encourages safe driving and compensates innocent parties for any injuries or damage to their vehicles or property as a result of a motor accident.

Although I extol some aspects of the current system, the Government need to take action to deal with rapidly rising premiums. We are not short of journalists and researchers who have made that point. In 2015, James Delingpole of The Spectator expressed it thus:

“The car insurance industry is a disgusting racket. It’s designed so that as many industries as possible can get their snouts in the trough.”

That may be hyperbole, but there is a definite need for cartel-like issues—or at least, the perception of cartel-like issues—to be examined. Reform of the motor insurance sector is necessary. I have little doubt that high insurance premiums and the perceived unfairness of the sector are leading to demand for change.

The petition does not provide a silver-bullet solution, although it is worthy of discussion and contains some interesting ideas. However, even if the petition’s answer is not the very best on offer, the Government should look seriously at it and other suggestions, including introducing graduated driving licences, freezing the rate of insurance premium tax and implementing planned reforms to the way in which lower-value, whiplash-style claims are handled. It is abundantly clear that the status quo on motor insurance premiums is not an option, and on that the Government must act. I thank the petitioners for bringing the issue to this Chamber today.

18:23

[Jenny Chapman (Darlington) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies, and to follow my hon. Friend the Member for Clwyd South (Susan Elan Jones). She did a good job of introducing the debate on behalf of the Petitions Committee. I will pick up on one of the issues she mentioned: graduated driving licences.

This petition is about trying to get the cost of insurance down. I am sure that we all support that, particularly for young people. The cost of their insurance is around £950 a year on average, which is prohibitively expensive for many of them. We all want young people to have the freedom and confidence to be able to drive and to develop their driving skills after they have passed their test, but the cost makes that difficult for many of them.

Young people’s insurance is so expensive because they are involved in many of the accidents that happen on our roads. People under the age of 24 drive about 5% of the miles driven in this country, but they are involved in 18% of accidents. In many ways, I can understand why young drivers bear the heaviest burden of insurance costs.

The issue came to my attention after the death of the son of two constituents. They do not want to be named or to receive lots of attention. They are working through their grief privately, and they wish to continue to do that. I will say a bit about what happened, which I do not think will identify them. Their adult son was killed by a learner driver in extremely bad weather conditions shortly before he was going to become a father for the first time. They have worked through a legal process but, as hon. Members can imagine, many lives have been devastated by this event.

My constituents raised the possibility of introducing a graduated driving licence system in the UK—something that has been raised with Ministers previously. Indeed, I raised it at Prime Minister’s questions a few weeks ago, and the Prime Minister gave a very positive response and offered to look into it. As the Minister is present, I will take the opportunity to go into further detail about why the Government ought to explore it.

Places that have a graduated driving licence include New Zealand, some parts of the United States, and Northern Ireland, where the system was recently introduced. The system supports novice drivers, who are young drivers who have recently passed their test, rather than all drivers under 24. In the UK, a 17-year-old can be fully licensed in just a few months, and 89% of young drivers complete less than 40 hours of tuition before taking their test.

A graduated licence could include different measures to ensure that drivers gain more experience before they can drive on any roads in any circumstances with any passengers. I am not being particularly prescriptive about which of the possible graduated licensing measures are appropriate for this country, but I think the Government ought to look at the system in principle. It would not necessarily be right to adopt what has been done in Canada and replicate it here; the system needs to be appropriate for the way that we drive and for our custom and practice.

There could be a learner stage, as we have now, but with a minimum learning period. That would mean that an amount of experience would have to be gained and a number of hours would have to be completed before somebody took their test. Some of that ought to be under the supervision of a qualified instructor, to ensure that there is some quality of instruction—not just instruction that is sufficient to get a driver through a test, but some in-depth learning under a qualified instructor.

I appreciate that learner drivers go out, perhaps with their parents, who may not be qualified instructors, to get some experience of driving, and that is entirely appropriate. However, the accompanying person ought to be over the age of 25 to ensure that they have greater experience. It does not sound very safe for someone who has recently taken their test and who has virtually no experience to take somebody out to get some experience of driving. As the mother of two teenage sons who will shortly, no doubt, want to learn to drive, the whole idea fills me with an enormous amount of dread.

After someone has taken their test, there could be a novice driver stage, which we do not have at the moment, in which they could drive unsupervised. We would have to discuss or consult on whether restrictions should be imposed at that stage. Ought there to be restrictions on carrying passengers younger than 25, unless the driver is a young parent? Obviously we would not want to place that restriction on a 24-year-old parent who has taken their driving test because they need to take their child to school. I suspect that somebody driving a young child around would be incredibly careful and mindful of what they were doing.

We ought also to consider time restrictions, because many accidents that involve young drivers take place between 11 pm and 6 am. We ought to find some way of limiting young drivers to daylight hours during their novice period, for their benefit and for their parents’ peace of mind—unless, of course, they want to get to work or college.

Perhaps a zero-alcohol policy should be imposed on young drivers so that they can benefit from clarity. I am sure the Government have considered such a policy for all drivers, but the data shows that alcohol is an especially significant risk factor for young drivers. We could also consider restricting engine size, or introducing an additional driving test after a certain period to ensure that new drivers have reached the desired standard, that they can drive as we all do and that they would benefit from complete freedom.

There has been much campaigning on the subject in recent years. It has been estimated that more than 400 deaths or serious injuries each year could be prevented by introducing a graduated licensing approach. Public support seems to be growing: a survey by the RAC Foundation found that two thirds of adults and 41% of young drivers would support the introduction of a graduated driving licence, 84% are in favour of a minimum learning period, 70% support a zero-tolerance alcohol policy, and 90% support mandatory lessons on motorways and in difficult conditions for all learners.

Nothing can bring my constituents’ son back. The young learner driver who was responsible will have it on their conscience for the rest of their life, and it must have been a horrific experience for them and for their driving instructor. My constituents make a good argument that, under a more sensible licensing system, the learner driver would not have been out in such horrendous conditions and the accident might not have happened. Where possible, I am very careful to walk instead of taking the car out when the weather is very bad, as it has been in north-east England over the past week. Even people with a great deal of experience think twice about driving in such conditions. We need learner drivers to experience all weather conditions and types of road, and to be able to drive in the dark, fog and rain, but it needs to be taught in stages. Confidence and the ability to react quickly, look around, notice and anticipate what will happen can be learned only by experience.

How seriously are the Government thinking about acting on the issue? Are they prepared to enter into discussions and consultations with interested parties about changing our system and introducing a graduated licensing system?

18:34

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Davies.

I congratulate the hon. Member for Clwyd South (Susan Elan Jones) on introducing the debate on behalf of the Petitions Committee in her characteristically balanced and thoughtful style. She presented it very well. I particularly liked the way in which she highlighted how the petition’s suggestion of insuring cars rather than drivers might help to limit the number of uninsured drivers on the road. In my experience, a lot of the uninsured drivers who cause problems tend to be uninsured for reasons other than cost—they may have lost their licences for various offences, or they may be serial offenders—so insuring cars might not completely eradicate the problem, but it is certainly worth considering.

I also liked the way in which the hon. Lady highlighted the key issues that should be considered before changing insurance legislation, including cost, personal injury, the possibility of helping the innocent to achieve justice, and overall safety—an issue that the hon. Member for Darlington (Jenny Chapman) picked up on when she spoke about graduated licences.

The hon. Member for Clwyd South also highlighted the possible dysfunction in the market. There is no doubt that many people are cynical about how the insurance market operates, so it is always good to shine a light on it and have transparency. She mentioned insurance premium tax, which was increased a couple of years ago in yet another Budget whammy. The cost of insurance for young drivers is a major issue. The hon. Lady asked the Minister to consider freezing insurance premium tax; I would like the Government to go further and consider introducing age restrictions on it. The cost of insurance for young people is so prohibitive that the extra 10% or 12% on top of their already big premiums is a real hit.

The hon. Member for Darlington mentioned insurance premiums and then raised a matter that was perhaps a bit off topic but that is clearly very important, because she is supporting her constituents in a case that has been really harrowing for them. I certainly understand the arguments for a graduated driving licence scheme and I look forward to the Minister’s response. The hon. Lady’s teenage sons might not appreciate such a scheme, and nor might many other young people, but in the light of the wider consequences for safety, we have to consider the matter seriously. I commend her for raising it.

It is clear that the issue is not as simplistic as car-only versus driver-only insurance, as the petition suggests. The United States system imposes liability insurance requirements on drivers, and many US car insurance policies include restrictions, although they may be as simple as a requirement for a manual driving licence—many cars in the States are automatic and many people have automatic-only licences. The Association of British Insurers lists other considerations relevant to a change in the UK insurance market system, such as experience with particular types of vehicle or age profile. Many car-only insurance policies include restrictions on the age and experience of drivers. It is not quite as simple as someone insuring a car and then all their friends and family being fully insured to drive it.

The petition is loosely based on the situation in Portugal, but as the hon. Member for Clwyd South correctly highlighted, the market in Portugal is not straightforward either. I know from experience that in the United Kingdom it is possible, even under the current market set-up, to insure a car such that drivers other than the named driver are fully insured to drive it. My dad’s car has been insured for many years to cover any valid driver who has his permission to drive it and who holds the necessary licence, although I believe there are some restrictions relating to penalty points and minimum age, so it is clearly possible to get car insurance that includes the flexibility for friends and family to drive.

I, too, have a teenage son, so I can certainly see the arguments and attractions of a car-only insurance premium, which might make driving less cost-prohibitive for young drivers. Certainly my 18-year-old son, Dylan, advocates such a system, because he thinks it will magically reduce his premiums. Clearly, however, it could reduce premiums for him only if we all pay a much higher share ourselves, so again there would be winners and losers, although it might make the market slightly easier for young drivers to enter into.

As the hon. Member for Clwyd South highlighted, this petition has a decent number of signatures—56,000. Last week, when I first got notification of the debate, I think it had 45,000 signatures, so there has been a considerable increase in the past week or so, which I imagine must be due to the interest generated by this debate. At the least, this debate is highlighting an issue for more people to think about.

Only eight of my constituents have signed the petition, so it is fair to say that it has not really caught the imagination of my constituents, or of others; perhaps that is why the Chamber is not quite as busy as it might be for some other petition-led debates. Of course, that does not invalidate the legitimacy of bringing forward the debate and allowing Members of Parliament to consider the issue, and to challenge the Government to consider the possible change that has been highlighted in the debate.

The scenario given in the petition is that a group of friends goes out drinking, and the driver who is responsible for the vehicle gets drunk and cannot drive it. If the car was insured through a car insurance policy, another driver—one of his friends—could drive it home. For me, it is not necessarily a credible proposition to introduce primary legislation for such a scenario. I suggest that education and better planning by people going on a night out is the best way to deal with that scenario. Otherwise, it might end up with somebody driving the car who does not have experience of that car, and if his friends are intoxicated he might not get responsible instructions on how to operate the car. As I see it, that would impose risks rather than being a benefit.

Ironically, if the future of the driving world is as predicted by the Government and many experts, we will have autonomous vehicles taking over rather than driver-led vehicles. In the bright, new, shiny world of the future, we will have driverless cars and therefore, in that scenario I just mentioned—friends going on a night out—there would not be a designated driver, because there would be an autonomous vehicle that could pick people up and safely take them home.

I sat on the Bill Committee for the Automated and Electric Vehicles Bill, in which the Government are legislating for car-only insurance for autonomous vehicles, because the risk model and functionality of those cars, as opposed to driver-led cars, mean that the insurance industry is saying that they need to be insured on a car basis, rather than on a driver basis. That is going through the legislative process at the moment and it may be that driver-led insurance gets phased out in the future.

The reality is that insurance is a risk-based market, so for the insurance market to function properly the insurance companies need to be able to assess the risk and quantify that risk to be able to set premiums. If they get it wrong, there are two scenarios. If they get it wrong and charge too much, they make excessive profits and those paying for insurance pay even higher premiums. If they get the risk model wrong, frankly they will go bankrupt, and if more companies went bankrupt there would be a shrinking market, which could lead to the worst cartel or monopoly situation. That would invariably drive up insurance premiums in the long run.

I will conclude by saying that we should never say never in terms of the changes that might happen, and I will be pleased to hear the Government’s response to the debate. At the moment, however, I am tempted to agree with the initial Government response to the petition—namely, that the change might not be the silver bullet we hope for and might not give the greater flexibility or the reduced premiums that we are looking for. I think that, on balance, the initial Government response is probably correct, but I would certainly like to hear what the Minister has to say about some of the other matters that have been raised today.

18:44

[Matt Rodda (Reading East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies.

I congratulate the Petitions Committee on bringing this matter forward for debate and the hon. Members who have spoken tonight, particularly my hon. Friends the Members for Clwyd South (Susan Elan Jones) and for Darlington (Jenny Chapman), and the hon. Member for Kilmarnock and Loudoun (Alan Brown). I found it particularly moving when my hon. Friend the Member for Darlington mentioned what sadly happened to her constituents, and my heart goes out to them.

Although the petition focuses on one area of reform in the insurance industry, it gives us the opportunity to discuss many other important issues in respect of the high price of car insurance, especially for young people. It is worth pointing out that, while wages have stagnated, the cost of living has increased and premiums for young people have continued to soar. We have heard tonight that analysis by the Association of British Insurers shows that 10% of the average salary of drivers aged between 18 and 21 is now being used to pay their motor insurance bills, which come to an average of £973 for comprehensive cover. That is obviously quite a sum, equating to five times the average premium for all drivers, and it is indeed a significant weight on young people.

The current UK insurance enforcement mechanisms are based on checking that each vehicle is covered by insurance, and insurance is priced according to the risk of a claim, as perceived by the insurance company. Factors that affect this risk include the age and gender of the driver, the type of vehicle and where the vehicle is usually kept or used. The petition seeks to limit the impact of the first of those factors, and it would significantly benefit younger and older drivers.

Of course, there are examples of where the car and not the person is insured. Hire car firms work on that basis, as do many business fleets. Therefore, the argument could be made that the change being proposed would just be an extension of something that is already in existence under English law. However, it is worth noting that both hire car firms and business fleets are frequently restricted to drivers over a certain age, and there is the possibility that if we moved to a car-based scheme to give cheaper insurance to young people, they could be denied insurance completely due to the same sort of age filter being applied. Where insurers could not enforce an age ban, they would certainly continue to set premium rates, such that total income matches total claims. That could result in the people who make the fewest claims paying more for their insurance than the people who make the most claims.

As my hon. Friend the Member for Clwyd South mentioned in her speech, the current system allows insurers to offer a customer a tailored premium to meet their individual needs. If the car rather than the individual was insured, insurers would not have the information to assess the risk of the likely driver and could not underwrite that risk based on the driver’s profile. Also, vehicle technology is changing at a rapid pace, particular models are changing and the features of vehicles vary greatly. That makes the risk profile and relevance of a driver’s experience even more significant.

A change to a car-based model of insurance would mean a redesign of all the systems that car insurers currently use to assess risk and calculate quotes. It is fair to say that that could be a complex, lengthy and costly exercise. My worry would be that any costs incurred by the insurer would be passed on to the customer.

The reality is that there is no one solution to the issue of high premiums for young drivers, however much one might be sympathetic to the problems they face. The insurance industry will always come back to the point that statistically young drivers are, sadly, more likely to be involved in motor accidents than drivers over the age of 25. That issue needs to be tackled from a road safety perspective, which is why many of us feel that there needs to be a Green Paper from the Government on the issue of young drivers and safety.

Indeed, in March 2013 the Department for Transport released a press release that stated:

“Government to overhaul young driver rules in bid to improve safety and cut insurance costs.”

It also said:

“Green paper on improving the safety and reducing risks to young drivers launched.”

It is now 2018—five years later—and we are still waiting to see that Green Paper. Despite calls from road safety campaigners and the insurance industry, the Government no longer appear to be addressing the issue. As far as I am aware, there is no sign of a Green Paper on young drivers at the moment, although I would be very grateful if the Minister could update us. If the Government are serious about doing something to address the core issues affecting the cost of car insurance for young people, they would bring forward this work. I ask the Minister when he is thinking of doing that. If he is not considering doing so, why not?

A Green Paper could look at a number of areas. Telematics, or in-car black boxes, have been hugely successful in bringing down the cost of premiums. They enable insurers to assess real-time data on an individual driver’s behaviour and to charge more accurate risk-based premiums as a result—in some cases, new drivers can see their premiums fall by one fifth or more. Currently, black boxes are subject to VAT, which pushes up the cost for insurers and drivers. Given that the evidence shows that the technology can help to reduce the number of road accidents, surely the question is whether it would be appropriate for the VAT to be removed.

The Green Paper could also address graduated licensing, which the Association of British Insurers believes would have a positive impact. As we have heard, that involves considering how and when individuals can drive after passing their test and it is in operation in some overseas jurisdictions, including Canada. There could be restrictions on the time of day a young driver could drive or on the number of passengers they could have. In countries where graduated licensing has been implemented, it has been proven to lower death and accident rates among young drivers. That is a significant point, as I hope all Members here tonight will concur.

However, such a scheme raises a number of concerns. For example, would it lead to unreasonable curfews on young drivers? What if it led to a young driver being forbidden to travel at night when they could be required to start work early in the morning? The wrong sort of graduated scheme could restrict opportunities and be unfair as a result. I have given only a couple of examples because I am conscious of time, but a Green Paper could explore many other areas that could improve safety for young drivers.

I also want to raise road safety targets. Other parts of the world, and many international bodies of which we are part, back such targets and feel that they should be supported widely. The last Labour Government brought in road safety targets before, sadly, they were abolished by the coalition Government. Road safety targets play an important role in focusing minds and contribute indirectly, as a result, to a fall in the number of young people killed or seriously injured and recorded as road casualty statistics. I am afraid that we are seeing a worrying rise in the number of people who are seriously injured or killed on the roads, with Government figures showing a 4% increase on the previous year in the numbers killed in 2016—the highest level since 2011—and an 8.5% increase in the numbers killed or seriously injured. I wonder, therefore, whether the Minister will consider reintroducing those targets.

This has been a constructive and important debate, and important and thoughtful points have been made by Members from across the House. I do not believe that the proposal in the petition would be the best way to tackle high insurance premiums for young people, for the reasons I have covered. There is no silver bullet, I am afraid. It is time we had a Green Paper on young drivers, so that the Government could have a detailed, rounded, comprehensive look at the matter. It is also time to bring back road safety targets and allow ourselves a longer-term vision of a much safer and, as a result, much better road network, with the numbers killed or injured reduced. Other countries have piloted a zero vision and there is no reason why we should not have such a vision. Road safety targets would be a vital component in achieving that.

16:25

[The Parliamentary Under-Secretary of State for Transport (Jesse Norman)]

It is a delight to serve under your chairmanship, Mr Davies. I would say I was speechless at the joy, except that I have to make a speech. I thank the hon. Member for Clwyd South (Susan Elan Jones) for opening the debate as she did on the important subject of insuring cars rather than the individuals who drive them. I also thank all hon. Members for their contributions, and I welcome the hon. Member for Reading East (Matt Rodda) to his position on the shadow Front Bench. It will be a delight to address some of his points.

I hope I can assure hon. Members that the Government take the cost of motor insurance seriously and are committed to ensuring that it is reasonable for all motorists. To do that, we have sought to identify the root causes of high insurance premiums and to address them directly, but we have no plans to change the current motor insurance system, as stated in our response to the petition, and there appears to be consensus across all the parties whose Members contributed to the debate that that is the correct position.

I will first outline the system and some of the issues and then come on to all the important questions raised by colleagues from across the House. The UK was one of the first countries in the world to recognise the benefit of compulsory motor insurance, back in 1930. Our long-standing approach has been that it is an individual’s use of a vehicle that has to be insured. The current system of insuring individual drivers, rather than vehicles, does not, as has been noted, prevent named drivers from being added to an insurance policy for shorter or longer periods, which can be a cost-effective way for friends or relatives who share a car to be included on a single policy. For a typical family of four sharing a car, the saving with a named-driver policy rather than each family member having their own policy has been estimated to be more than £1,000. There are also new insurance products coming on to the market that facilitate short-term cover, including insurance by the hour and car-sharing arrangements, without the need to change insurance law. Such products make it easy to arrange cover for someone else using your car. One new car insurance app quotes an average of £10.90 for an hour’s coverage, which can be set up at very short notice, and I am sure we can expect further developments of such pay-as-you-drive solutions in the coming years.

It is important to note, as colleagues have, that it is not at all clear that changing the system would reduce the cost of insurance. In fact, there is every reason to think it could raise it. The complexity involved in changing the system would have significant cost implications, yet would not necessarily produce tangible benefits for the consumer. Some countries opt for a car-based rather than a driver-based system because they have no-fault legal regimes, under which each insurer compensates their own policyholder. So it is a question not just of how people purchase insurance but of the wider civil law principle of liability, which is different in the UK from those other countries. Changing our motor insurance system would almost certainly, therefore, involve complex legal changes and require detailed consultation. A change in the underlying legislation would mean that all insurers would need to redesign the systems they used to offer quotes, which, as the hon. Member for Reading East hinted, would be a complex and lengthy exercise and could have significant cost implications for both the industry and, in due course, consumers. Given the alternative solutions available, such as adding a named driver or adding “drive other car” options to motor insurance policies, such significant reforms would be disproportionate.

The price of insurance currently depends on a range of factors, including many that are driver-specific: driving history, including previous claims and unspent drink-driving convictions; the use made of the vehicle, for example, whether for commuting or business; and years of driving experience. If insurers were required to cover the vehicle and were not able to take such factors into account in their pricing, the cost of insurance would likely rise for those with a good driving record and a history of safe driving and they would end up bearing, on a net basis, the additional costs of drivers who were not as careful or safe. The evidence for that is that insurers already tend to charge much higher premiums for any-driver insurance policies, under which less good drivers can join a named driver. Named-driver policies allow friends or relatives who share a car to be included on a single policy and provide the insurance provider with the necessary information to assess the potential risk of each individual.

Turning, as one or two colleagues have already done, to the scenario used in the petition, I wish to note that it is based on a drink-driving situation. Three friends need to get home from a night out, two of whom, including the driver, are under the influence of alcohol and are unable to drive. The petition suggests that a system that insured the vehicle would enable the third friend to drive the group home. However, as has been mentioned, the risk could be significantly greater than is suggested. As has been noted, the owner’s friend may never have driven the vehicle and may have much less overall driving experience or a significantly worse claims history. In an era where vehicle technology is changing rapidly, the variety between newer and older cars is only getting greater, so the driver’s individual experience of a particular make and model of car will have increased significance.

We have to think about the cost of covering vehicles, not people, as well as the incentive that creates. If that group knows that one of its members—they may be the least experienced driver—will be sober, that could create an incentive that removes the restraint on people’s drinking. There may therefore be collateral unexpected consequences, even within the scenario that was set out. That by no means means that the Government are not determined to seek to reduce the cost of insurance, and it is important to make that clear. We have no plans to change the current system, but that does not mean we are not tackling other key issues known to drive up the cost of premiums, several of which have been discussed today.

One issue that has not been discussed is that of the measures we are taking to tackle the high rate of fraudulent, minor and exaggerated whiplash claims. The scale of the problem is highlighted by the fact that 85% of personal injury claims made in 2016-17 relating to road traffic accidents were labelled as whiplash or soft tissue injuries to the neck and back. I am afraid these data are four or five years old, but that figure compares with 30% in France and Denmark, 31% in Spain, 35% in the Netherlands and 68% in Italy, which is a bit more like us. A large number of claims management companies actively encourage claims after even minor crashes, thereby potentially exacerbating the problem. The magnitude of costs that insurers inherit from whiplash claims are often passed on to consumers through higher insurance premiums, raising the cost overall.

In February 2017, the Government announced a robust package of reforms to crack down on minor, fraudulent and exaggerated whiplash claims. The measures will be introduced in a civil liability Bill in due course. Subject to parliamentary time and consideration, the Government aim to implement the whiplash measures as a package in April 2019. It is estimated that the reforms will bring down the cost of motor insurance by around £35 a policy. Leading insurers, such as Aviva, have publicly committed to passing on savings through lower premiums. Motor insurance operates under something of a cloud, as we recognise, and has often been criticised on competition grounds, as colleagues have noted. In many ways, however, it is an intensely competitive industry, and insurers will have be under pressure to pass on savings or risk being priced out of the market. We as the Government will monitor the industry’s reaction to the reforms and will consider further action if required.

I want to pick up on some of the points that Members have raised, which include some important issues that are collateral to the petition, but are important for us to touch on. The hon. Member for Clwyd South mentioned that she had three key tests for legislation in this area. The first was the effect on costs, the second was the effect on the innocent party and the third was whether it would help or hinder road safety. I hope she will recognise that one of the unintended consequences might be to push up the cost of personal injury claims. The UK is famed for its relatively high level of personal injury claims, which is one reason why it yields whiplash claims. Those claims are one of the things funded by insurance premiums. The downside is higher costs, and we have identified that problem, but the upside is that personal injury claims tend to get paid out at a higher level in this country. We are keen to ensure that the link between driver insurance and driver behaviour is maintained precisely to maintain personal accountability.

The hon. Lady, like the hon. Members for Darlington (Jenny Chapman), for Kilmarnock and Loudoun (Alan Brown) and for Reading East, was absolutely right to note the high cost of young people’s insurance claims and the higher risk that young people face in their motoring. In answer to the question raised by the hon. Member for Reading East, I cannot comment on what the coalition Government did or did not promise about a Green Paper, but I can tell him that these issues are of enormous interest and importance to the Government. We have commissioned a lot of work under our Driver 2020 programme, which is specifically designed to explore different forms of intervention that can bear on young people and improve their driving and therefore their insurability. That includes work on hazard perception, simulated training, education, parental engagement, data recorders, telematics and the rest. That is important.

To respond to the hon. Member for Darlington, we absolutely have not ruled out some form of graduated driver licence. We do not think it is the right policy at the moment, but we are looking at it. As she acknowledged, there are different forms of GDL, and it is important to be specific about the elements that might be brought in. It is not policy, but as she has said, and as the Prime Minister has said, we are considering that for precisely this reason. It falls into a wider desire across Government and certainly on my part to reduce the risk to young drivers, particularly in rural areas.

In my county of Herefordshire, I went to an extraordinary demonstration organised by the local fire service called Dying 2 Drive. It is run in connection with the ELY Memorial Trust, which is a wonderful local charity dedicated to helping prevent road accidents for young people. It is the most petrifying experience. Young people in sixth forms are exposed to a road traffic accident with fatalities right there. The situation in front of them is then solved through an intervention by the fire service and the police. It is a very moving experience. It is very hard to see it and drive without great care and attention thereafter, and the evidence is that it is very effective. I would like to see it rolled out by all kinds of fire services. It underlines the wide range of interventions that can be used to try to help this problem of young people at risk on our roads.

I will pick up a couple of other points that have been made. Adverse consequences are a theme that everyone has rightly touched on. We all recognise that the cost of premiums is higher than we would like, particularly for certain groups in society. We are determined to adopt a series of reforms—I have talked about whiplash and the work being done on young people—to try to reduce the high premiums and their impact on particular groups, but we have to be aware of the law of unintended consequences and the danger that such reforms may inadvertently drive up costs and premiums. Costs may be reallocated to people in a way that undermines the incentives to drive well and drive safely. It would be a disaster if we had those counterintuitive and counteractive results.

I am grateful to all Members who have contributed and to the hon. Member for Clwyd South for introducing the debate.

[Alan Brown]

I thank the Minister for giving way just as he was finishing. In terms of the costs for young drivers, I mentioned the fact that the extra 12% insurance premium tax is a further hurdle for those drivers to overcome. Could the Government look at reforming that?

[Jesse Norman]

It is hard to respond to that question, because it is about a tax and is therefore handled by the Treasury, rather than my Department. Also, it is not a tax that falls specifically on young people, but on the industry as a whole. As with any tax, one should consider not only the tax but the things it is intended to pay for and might be paying for, whether that is reducing debt or funding public services. The point I would make to the hon. Gentleman is that over the past few years the Department has pioneered a continuous insurance enforcement system that has significantly reduced the number of uninsured drivers by some 40%. Again, we take the point about the concern, but we specifically want to address the cause of it, which is the number of uninsured drivers. That is the core point of the remark.

To wind up, I am grateful to colleagues across the House and the hon. Member for Clwyd South for introducing this debate. I am grateful to the Petitions Committee for putting it on our docket. We all recognise that the cost of car insurance is an important issue for all motorists. That is why the Government are committed to the things we have discussed tonight: tackling fraudulent whiplash claims, working with the motor insurance market, keeping premiums as low as they can be and addressing the risks and concerns that relate to young people and those in rural areas. I hope on that basis that the House will be satisfied.

19:09

[Susan Elan Jones]

Again, I want to put on the record my thanks and those of the Petition Committee to the creator of the petition and to its signatories. It is rare in this place to have an in-depth discussion on car insurance. In my seven and three-quarter years as a Member I cannot remember a time when we have looked at car insurance and, in the same breath, road safety, but today’s debate has done that.

I want to pay a special tribute to my hon. Friend the Member for Darlington (Jenny Chapman) for her comments on the graduated licence. As she was speaking I thought back to my time as a sixth former when some friends who had passed their driving tests before me kindly offered to take me round the roads and country lanes of north Wales. It was an immensely enjoyable experience and absolutely useless in terms of driving practice to pass a test. I failed my driving test on three occasions until I went to university and passed on the streets of Bristol. I wholeheartedly agree with my hon. Friend that there is a very strong case for a graduated licence. I also agree about the alcohol restrictions of which she spoke. I hope that if that idea ever sees the light of day we could see car insurance premiums for young people reduced, and also greater safety on our roads, which cannot come a day too soon.

My hon. Friend the Member for Reading East (Matt Rodda) mentioned a Green Paper, which I would welcome. The Minister has not exactly ruled it out and I hope that that might be considered in future. In today’s debate we have been able to look at car insurance and the critical issue of road safety in the round. I whole- heartedly thank again the creator of the petition and all the signatories who made that possible for us.

Question put and agreed to.

Resolved,

That this House has considered e-petition 207616 relating to changes to car insurance.

19:12

Sitting adjourned.