Cost of Motor Insurance

David Ward Excerpts

Tuesday 8th November 2011 Commons Chamber

[Mr David Ward (Bradford East) (LD)]

Just after I was elected, I was asked to go to a local mosque to meet a group of young men who wanted to talk to me about various issues in the BD3 area of Bradford. It soon became apparent, however, that the main issue that they wanted to discuss was unaffordable motor insurance. Tales were told of people having to give up the ownership of vehicles used for family purposes and, more worryingly, of people having to give up the ownership of vehicles such as taxis, which were used for businesses and as part of their livelihoods. Even more worrying, I guess, were tales of friends who used Leeds postcodes when applying for insurance, despite living in Bradford, as the only way—fraudulently, of course—to obtain affordable motor insurance.

I undertook to determine the extent of the problem locally, and to see what proceedings had already taken place in Parliament to address the issue. It quickly became clear that Parliament did indeed take the issue seriously, especially through the work of the Transport Committee. It was useful to see the work that took place during the previous Parliament, and I am delighted that it has continued into this Parliament on such an important issue. Indeed, I welcome the Committee’s dogged and persistent pursuit of it.

We distributed about 15,000 local survey forms, and incredibly almost 2,000 were returned. In fact, they are still coming back. The respondents to the survey have seen their premiums rise by more than 60% in the past two years, at an average of just under £900, and their responses show that many Bradford residents are well aware of the role that personal injury claims play in pushing up total claims and, therefore, premiums. Many people have reported being pressurised to make bogus claims, and often by reputable firms of solicitors.

We carried out interviews with the police, insurance brokers and companies, driving instructors, GPs and, of course, numerous affordable-insurance-seeking drivers in order to get their views, and we produced a report and held a summit meeting to report back on the work that we carried out. What became apparent was that almost everybody we talked to had their own pet reason why insurance premiums were high. Whoever we talked to, they would say, “This is why they are so high.”

Many members of the public blamed uninsured drivers, and unfortunately we have the dishonour of topping the hit parade for uninsured drivers. I think that we have held it for several years in the BD3 community, and during our survey we often heard the question, “Why don’t the police do more about it?”

The police pointed out that the cost of uninsured drivers—the Transport Committee covered the point, but not a lot of people know this—is about £30 per premium, and it plays a part in high premiums but not a tremendously large part in excessively high premiums.

I went out with the police on a dawn patrol—all very exciting—in a vehicle impressively equipped with the latest, unbelievable technology for automatic number plate recognition. We have a ring of steel in Bradford—fixed cameras—but the technology in our vehicle enabled us to see all the number plates coming towards us and going away from us. They pinged up as information came through about vehicles that the police had an interest in, not necessarily just those that were uninsured.

Within 60 minutes of leaving the police station, we had identified an uninsured driver, the car had been seized and it was on the back of a trailer on its way to the compound. The car probably ended up being crushed. It would have been held for a period, but probably the owner just went to the next car auction and replaced the vehicle—and off he went again.

The police do impressive work—they seized 2,000 vehicles during the previous 12 months—but the level of fines has to be investigated. There is a difficulty for magistrates, because they have to take into account the ability to pay of the person being charged. It seems a simple solution just to increase the fine, but if the person cannot pay the penalty it does not really matter whether it is £300 or £3 million because it is not going to be a deterrent.

[Karl MᶜCartney]

The hon. Gentleman may have heard my speech, in which I made precisely that point. Fines have to be such that uninsured drivers definitely insure themselves. Unless they are increased in the magistrates courts and elsewhere, such drivers will not be forced to do so. What does the hon. Gentleman think?

[Mr Ward]

Absolutely. When the fines are so much lower than the premiums, there are bound to be people who take the risk of getting caught, and it completely undermines the public’s confidence in the system and, indeed, the police. If fines are to be a proper deterrent, surely they should at least reflect the amount that the driver would have had to pay had they not avoided paying insurance.

[Sammy Wilson (East Antrim) (DUP)]

Given that the fine system is clearly not working, does the hon. Gentleman agree that one way we could deal with the issue would be to ensure that when someone purchases a car, whether from an auction, a dealer or wherever, they need to have proof of insurance before they can leave the premises? In that way we would have someone checking before the car ever got on to the road.

[Mr Ward]

Absolutely. I mentioned all the survey returns that we received, and we asked for people’s suggestions on how they would improve things. Several respondents suggested a gibbet in the centre of Bradford, but the hon. Gentleman’s point is useful, because there is no shortage of suggested solutions. I am not aware of the processes and protocols of the House, but, rather than relying all the time on the Transport Committee to resurrect and pursue the issue, we could establish a small all-party working group to consider many of the ideas that are coming forward and constantly keep up the pressure. For a number of years, there has been a spiral of ever-increasing insurance premiums, and we need to reverse that. We need to keep constant pressure on the system until we bring premiums down.

We considered the issue of road accidents. Our initial, intuitive position was that there are a lot more accidents and that that explains the situation; but of course the opposite is true. Road safety experts revealed that the number of car accidents had fallen dramatically. Driving instructors called for more stringent testing—I suppose they would—and, indeed, for post-test tests to take place perhaps a year or six months after the original test to deal with some of the issues involving young drivers. However, that did not seem to offer a solution to the murky world of personal injury claims that became apparent. There is an increasing number of claims and the cost per claim emerged through discussions with brokers, who candidly told us that £3,000 was the going rate for a personal injury claim. It is widely known in the community that insurance companies are willing to pay out because it is a quicker and less costly course of action than challenging claims, even when they suspect claims of being opportunistic and fraudulent.

One driving instructor was full of genuine, deep sympathy for young drivers. He said that many good drivers simply cannot afford vehicles. There is a problem when a young driver passes their test and cannot afford to drive for probably a year or 18 months but they then jump into a car. Putting that to one side, the driving instructor was sympathetic to young drivers who had passed their test, but who were unable to afford insurance. However, he then said, “I did it, you know.” I said, “Well, what exactly do you mean?” He said that he was giving a driving lesson to a young woman and that they were involved in an accident that was not their fault. There was minor vehicle damage and no personal damage at all—or so he thought.

The next day, the woman returned after a discussion with family members who were clearly more streetwise than her. She told the instructor that, over night, she had developed a neck pain. They both ended up claiming and received more than £2,000 each plus £3,000 for the car repairs—simple as that. I went to see the police and said, “Well, surely you can do something about the matter.” The police said that it is very difficult to prove fraud in such cases. In fact, they had managed to catch only one person who was guilty of fraud. That case involved an accident after which somebody had immediately jumped out of the car, lain on the floor and called for an ambulance. The person then realised that they were not insured, so they rang their brother and got him to lie on the floor. That fraud was, in fact, detected, but that example shows the difficulties.

People talk about the compensation culture, but what is interesting—I am fascinated by this—is the immoral stance taken by many people who are otherwise good and honest. They would never drop a sweet wrapper or let their dog foul the pavement, and yet they get involved in this world of fraud. Many people believe that they should not have been asked to pay so much for their insurance in the first place and that it is not wrong to try to get some of that money back through a fraudulent claim. It is almost as if people feel they are getting back something they are entitled to. Good people are, sadly, doing bad things.

[Sammy Wilson]

The hon. Gentleman is right: there is that culture, which is encouraged by people’s experiences, their friends’ experiences and sometimes the advice they are given by their legal advisers, solicitors and so on. However, does not the fact that insurance companies almost appear to roll over if a personal injury claim is set below a certain level encourage people to make such a claim? The hon. Gentleman is right to point out that fraud is sometimes hard to prove, but one thing insurance companies perhaps ought to be doing is to fight more of these cases, so that if people want to get this money, they have to put up some evidence in court. That might deter some of these applications.

[Mr Ward]

That is absolutely right; we need someone to take on and challenge the system. Over the years it has clearly become easier just to recoup the money by doing the same to someone else. That is what has happened in the system. Insurance companies have been guilty of such an approach and they have had to respond to what other companies have done. Those other companies have then also had to do it, and so the cycle goes on.

We considered the various component parts of the matter: whiplash injuries, referral fees, personal injury lawyers’ costs and many of the things that have been covered in great detail by other speakers and the Transport Committee. The overall conclusion was that there was not a simple solution to the problem of unaffordable car insurance and that, in fact, it is a complex and deeply flawed system. None of the component parts can be removed: they all fit together to create the system and they all need to be dealt with individually. We need a batch of measures, each one designed to deal with the component parts of what has become a crazy, crazy system.

Our work over the summer generated a number of case studies, some of which would be funny if they were not so serious. I was contacted in January by a teenager who had been quoted £26,000 for third party insurance on a 1.1 litre Citroen Saxo. When I raised that with the local paper, I was contacted by other young people who had received even more ridiculous quotes. One young woman was quoted a figure of £53,000, which was the record. I think we can take it that the insurance company did not want to insure that person. Clearly such premiums are unaffordable for anyone, even those with an extremely high disposable income.

The young seem to be particularly affected, but they are not the only ones experiencing problems. The hon. Member for Lewisham West and Penge (Jim Dowd) mentioned an incident concerning an elderly gentleman, which shows that the issue affects everyone. During the summer, I was visited by various reporters and journalists as part of my investigation. The comical thing was that invariably, after the interview or the filming, the journalist or the cameraman or woman gave me their story or that of their nephew, niece, son or daughter. They all had a tale to tell and were of the opinion that something had to be done.

A recent case study is worth considering because it is about an ordinary person. A gentleman and his wife owned a 2007 Vauxhall Corsa that was in decent condition. He had held his licence for 17 years and had had no accidents, and his wife had held her licence for five years and had had no accidents or claims. He had a nine-year no-claims bonus. In 2009-10, he paid £600, the next year he paid £800 and the next year £6,200—no accidents, no claims, no difference. Another sad thing about that case is that the gentleman has recently become unemployed, and because of that his insurance premium has gone up. How does that make sense?

That case study reveals the impact of the postcode lottery, which is an issue that has not been raised because it is difficult to do so. I mentioned that my very first meeting was in a mosque. There is a huge community cohesion issue because people say, “The reason we are paying a lot is because of those people over there.” That is why I was so keen to get involved in this campaign at the beginning. The young men I met were living in an area with ridiculously high insurance premiums.

[Graham Jones (Hyndburn) (Lab)]

People such as taxi drivers have been particularly hit. As other Members have said, taxi drivers’ premiums have risen exponentially and they are suffering greatly—far more in fact than the constituents who write to me because they are suffering. In my constituency, there is a second issue with taxi drivers, and I wonder whether it is the case elsewhere. Very few companies now want to insure taxi companies, and that is probably why the fees are more exorbitant. In my constituency, only one or two insurers will insure taxis in my postcode area. Is that something that the hon. Gentleman is familiar with and would like to comment on?

[Mr Ward]

The hon. Gentleman makes a good point about the branding of people. Whether it is taxi drivers or all those who live in the BD3 area, the assumption is that because they are from that area they are all contributing to the high insurance premiums that we are paying. That is very unfair and also very dangerous as regards the cohesion of the wider community.

The report that we prepared concluded with a whole range of measures, and many Members have come up with additional measures. I conclude by again paying tribute to the work of the Select Committee, which needs to keep driving this. The title of our report was “It can’t go on like this”, and we all know that it cannot go on like this. If we all work together across the House we can slay this monster.