Cost of Motor Insurance

Jonathan Evans Excerpts

Tuesday 8th November 2011 Commons Chamber

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

I beg to move,

That this House expresses concern over the large increase in the cost of motor insurance in recent years, including in relation to young drivers; welcomes the report by the Transport Committee on the cost of motor insurance (HC 591) and its continuing inquiry into the reasons for this increase; notes that factors explaining the cost of motor insurance include the number and cost of personal injury claims arising from road accidents, assessment of risk, fraud, and uninsured driving; notes that the Government has taken some steps to deal with these issues, including a ban on referral fees in personal injury cases, but that more could be done; further notes that Ministerial responsibility for these issues is split across several departments; and calls on the Government to establish a cross-departmental Ministerial committee on reducing the cost of motor insurance and to publish a plan for dealing with the different aspects of this problem during this Parliament.

Members of the Transport Committee are signatories to the motion, and I thank the Backbench Business Committee for allowing me to move it.

Many Members will have received letters complaining about the rising cost of car insurance. People with clean records who have driven for years without incident have suddenly found themselves facing big increases in their premiums, and young drivers are now being asked to pay about £3,000 for insurance, effectively forcing them off the road.

The Committee started looking into this issue in November of last year, and we published a report in March. It generated massive interest. People are extremely concerned about their premiums, but serious questions about how the insurance industry works were also raised, and, unusually, we decided to reopen our inquiry.

It is, perhaps, fair to say that motor insurance was not the Minister’s highest priority before our inquiry began, but I hope it has become a higher priority now. Many Members have campaigned on the cost of motor insurance, and I single out for tribute my right hon. Friend the Member for Blackburn (Mr Straw), who has campaigned strenuously for the abolition of referral fees.

The AA’s regular survey of the cost of motor insurance shows that quoted premiums have more than doubled since 2006, reaching an average of £921 last month. The premiums faced by young people, and especially young males, are significantly higher—in many cases, about £3,000.

[Jonathan Evans (Cardiff North) (Con)]

Did the Committee also look at the impact of the recent Test-Achats judgment on gender discrimination? At present, there is a significant disparity between insurance rates for young women and young men, but that case argues that the rates should, in fact, be the same.

[Mrs Ellman]

I thank the hon. Gentleman for his question. The Committee did not look specifically at that point, but I fear that if there is to be equity, it will be equity upwards, rather than lead to a lowering of premiums.

High premiums have a major impact on the lives of our constituents. Motor insurance is rightly compulsory, but for many people driving a car is a necessity, perhaps for getting to work, to college or to hospitals for appointments, as well as for visiting friends and family, doing the shopping or taking children to school.

I and other Members have received a great deal of correspondence from people wanting to give examples of the problems they have experienced. I received a letter saying the following:

“My partner has just tried to insure me again on our vehicle which is not a sporty flash car, to be told that it would cost him an extra £1,370.”

A lady from Birmingham wrote:

“My car was involved in an accident where a lorry collided with my car. The driver accepted it was his responsibility…My renewal was due and my premium had increased from £700 to over £2,000.”

These stories illustrate why the Government must act.

Surprisingly, the recent increase in premiums has coincided with significant improvements in road safety, which is part of a welcome trend of falling numbers of deaths and serious injuries on the roads. Why have premiums risen so much, therefore?

There is better access to justice, with no win, no fee arrangements. Those arrangements are being changed, but we must not return to a situation in which justice is available only to the rich.

There is also cold calling, where claims management companies canvass for claims, often using personal information obtained from unknown sources. Where is the regulation of data protection that is supposed to be in place? Claims management firms deserve special scrutiny. They encourage people to claim, and to make multiple claims when they might not otherwise have done so. Premiums in the north-west are 50% higher than the national average, apparently because of the activities of these companies.

Referral fees have been in the news. They are paid to a number of players in the industry as a reward for passing on business, thereby encouraging claims and sometimes inflating bills. They are not paid to insurers alone; a number of bodies are involved, including insurance companies, solicitors, car hire firms, claims management companies, medical experts and vehicle repairers. Although the Government have started to act on referral fees, what they are doing does not encompass all those sectors of the industry, and neither does it take into account how companies might try to get around the abolition of referral fees. There are now alternative business structures, where non-lawyers can buy legal practices. How will the Government ensure that companies do not get around the ban on referral fees through taking such steps?

Fraud is a major concern, including the staging of accidents by criminal gangs. That adds £80 to the average premium.

--- Later in debate ---

[Karl MᶜCartney]

It is very extensive, and I shall discuss it later in my speech. It is something we have to deal with.

The system relies on a lack of willingness to contest such fraudulent claims. After the judge’s decision in our most recent case, it was revealed in court that these scammers had tried it on—successfully—six times in the past five years from the same registered address of the vehicle. Unpunished, they are probably trying it on again as I speak. Not only do uninsured drivers increase the insurance premiums of law-abiding insured drivers, but we taxpayers are being fleeced a second time, as our courts are seeing similar claims cases taking up large amounts of court time, whereas 10 to 12 years ago that was not so. Typically, the courts, those working in them and the legal system suspect that the true number of fraudulent claims is at least 10 times that which reaches our courts.

To gauge whether my views were in tune with others—I feel that there is an appalling lack of appropriate punishments for uninsured drivers and accident scammers—I conducted an online survey, as I said. It was predominantly of local people in Lincoln and asked their views about uninsured drivers, given that the average fine for driving uninsured in the county of Lincolnshire was £213 in 2010, a reduction from £233 in 2008. I was not surprised to find that the vast majority felt the fine level was too low. It is especially galling for insured drivers to note that while their average insurance premiums have risen by up to 40% in recent years, the fines for uninsured drivers have decreased in the same period. We can see why this situation has occurred. The average comprehensive premium for the Lincoln postcode was just over £603 at the end of September 2011, which shows that someone has to be caught 2.8 times or more in a year for it to be more expensive than to drive with insurance.

However, as we have heard, insurance is about risk and age, and those key factors also matter. For example, the estimated cost for comprehensive insurance for a male in Lincoln aged between 17 and 20 is £2,733. It is £1,338 for a 21 to 25-year-old and £765 for a 25 to 30-year-old. That means that anyone from those age groups caught driving uninsured has respectively to be fined 12.8, 6.5 and 3.6 times per year before the fine exceeds the insurance cost.

[Jonathan Evans]

But this is not only about the financial penalty that may be imposed on uninsured drivers. If the uninsured driver is involved in an accident, the significant costs of personal injury have to be borne by all the people who are doing the right thing, and that then adds to the insurance costs to which my hon. Friend has referred.

[Karl MᶜCartney]

My hon. Friend is correct, and that is something else that I will discuss later in my speech.

For many, the risk of driving without insurance is attractive. The “getting away with it” factor is too enticing. As hon. Members on both sides, and you, Mr Deputy Speaker, may know, I like being positive, and there have been many changes recently that I warmly welcome: the reported fall, by a claimed 25% in the past five years, in the number of people driving while uninsured; the recent clampdown on people owning uninsured cars; the seizure of uninsured vehicles; and the coming prevention of insurance companies and other agencies selling on personal data, which has fuelled insurance scamming. That move followed the welcome recent Motor Insurance Regulation Bill sponsored by the right hon. Member for Blackburn (Mr Straw). I hope that my ministerial colleagues will ensure that this applies to all referrals of personal data following vehicle accidents, and that the insurance industry and associated agencies will not look for any loopholes.

However, I believe that more needs to done, and the survey that I conducted through my website shows that the vast majority of local people who responded think so too. Unfortunately, I suspect that much of the insurance industry’s claimed recent fall in uninsured driving has come in London, where of course there has been a proliferation of number plate recognition cameras, in the City and, more recently, with the congestion charge area. Across the country a frightening statistic is still in force, which is that when we drive on UK roads in some areas every 12th car we pass has an uninsured driver at the wheel.

Having taken my views and those of my constituents into account, I have come up with a 10-point plan to clamp down further on the scourge of uninsured driving and phoney claims. First, as part of the need for a far more zero-tolerance attitude to be taken against supposedly low-level crimes, driving without insurance needs to be treated as a higher priority by the police. Like drink-driving, uninsured driving needs to be no longer socially acceptable.

--- Later in debate ---

[Jonathan Evans]

Rather than go down the route of legislation, might it not be a helpful preliminary step if the insurance industry reduced the premium provided that people accepted the proposals he has made on driving behaviour? That would not require legislation and might ultimately encourage better driving habits.

[Roger Williams]

That was precisely the comment that the Minister made to me. I commend the work of Co-operative Insurance and other insurance companies, which have come up with their own graduated driving licence scheme. A smart box in the insured car monitors many aspects of the driver’s habits, including speed, cornering and the time the car is driven. The driver is given a quarterly cashback payment according to their driving score. The data collected from a sample of 1,300 young drivers show that almost four in five consistently drive within the speed limits, and 40% of males and 41% of females achieved the top score in all categories.

So either through Government policy or by persuading insurance companies to take up similar measures, we can reduce the number of accidents on the road. That will not only bring down the costs of everyone’s insurance premium but, far more important, prevent many fatalities on our roads.

Intercity Express and Rail Electrification

Jonathan Evans Excerpts

Tuesday 1st March 2011 Commons Chamber

[Mr Hammond]

I am happy to acknowledge the hon. Gentleman’s tireless battle for the IEP. He has arranged for various worthies from his constituency to visit me and the Department to make the case. This has been a complex process with legal, technical, financial and commercial issues to resolve. We have worked closely with Hitachi to get to this point. I understand that he wanted us to get here more quickly, but I assure him that we have progressed as fast as possible.

[Jonathan Evans (Cardiff North) (Con)]

As a Cardiff Member of Parliament, I thank my right hon. Friend unequivocally for today’s announcement. I also congratulate my right hon. Friend the Secretary of State for Wales, who has fought her corner wonderfully. Making the case for the electrification of the valley lines in the announcement was something that Opposition Members did not expect and that they were never committed to. From June 2009, they were supposedly committed to electrification, and yet nothing whatsoever was done. Will my right hon. Friend the Secretary of State for Transport commit to ensuring that this announcement is carried forward, unlike the announcements that were made by those who are now on the Opposition Benches?

[Mr Hammond]

Absolutely; I give my hon. Friend that commitment. The hon. Member for Garston and Halewood (Maria Eagle) used most of her time in responding to the statement by talking about Swansea. The evidence shows that there is a much stronger business case for the electrification of the valley lines. When a limited amount of public money is available, it is absolutely incumbent on us—she can ask her sister about this—to ensure that it is spent on the areas that deliver the best value for money to the Exchequer.

Tolls (Severn Bridges)

Jonathan Evans Excerpts

Wednesday 23rd June 2010 Westminster Hall

[Jessica Morden]

I thank my hon. Friend for her intervention. I agree with her and hope that the Minister will pick up her point in his closing remarks. The industry is already struggling, with more than 3,000 heavy goods vehicle drivers claiming jobseeker’s allowance in Wales alone.

The previous Government froze the tolls on the Humber crossing after a study of the impact on residents and businesses. There has been no study of the Severn that I am aware of, so please could the Department for Transport work with the Welsh Assembly Government to initiate one?

[Jonathan Evans (Cardiff North) (Con)]

The hon. Lady is being very generous about interventions. As someone who is himself returning to the House, I congratulate her not only on raising this issue, but on continuing the wonderful record of her predecessor, who raised many of these issues, as the right hon. Member for Torfaen (Paul Murphy) will recall.

In relation to the charge, my understanding is that the actual real revenue is not likely to be reached until 2016. Is not the difficulty about abolishing the tolls the fact that the bridge was in essence built by a commercial company at no cost to the Government and was to be funded from the tolls? In that context, my constituents look to the ease of crossing the bridge, rather than having any expectation that in these times the tolls are likely to be either frozen or abolished.

[Jessica Morden]

I thank the hon. Gentleman for his intervention, but my constituents feel very strongly that the year-on-year increase in the tolls is very unfair on them locally. I promise that I will come to the concession later. I am not claiming that we should scrap all the tolls when the concession expires.

More than 31,000—31,437—heavy goods vehicles use the bridge each week. That is 4,491 a day. There are clear patterns of movement on the crossing, with most vehicles travelling between peak times. It is clear to me that a more flexible pricing structure, with off-peak travel for business, would offer incentives for people to travel at certain times of the day or night. That would reduce congestion, save on emissions and save companies money at the same time. I ask the Minister also to investigate that issue.

Finally, let us look to the future. According to the Highways Agency study of 2008, the current Severn crossings are being maintained at a constant level and require an annual maintenance expenditure of about 20% of the annual income generated from the tolls. In a few years, when the bridges are expected to be turned over to the Highways Agency—it would be helpful if the Minister confirmed the exact thinking at the moment on what that date might be—the agency will receive the revenue without the burden of debt.

--- Later in debate ---

[Norman Baker]

That matter has not been considered in my short time in office. The hon. Gentleman has raised an issue that I am sure is important to people in Wales and I will ensure that he receives a reply.

[Jonathan Evans]

The Minister shared with us a figure of £995 million. As I understand it, when we last heard from the Department, the assessment of how much mileage has been made towards that figure was about £682 million. Is the Minister able to update us on the current take, or if not, will he share it later?

[Norman Baker]

I do not have that precise figure at my fingertips, but if comes to me in the next couple of minutes I will tell Members. If it is not possible to do so before half-past 4, I undertake that all Members present will get a written response.

When the Secretary of State takes over the bridges at the end of the concession, the Government are authorised to continue tolling for a further five years following the handover of the crossings, to enable them to cover their own costs incurred, such as the £19 million that I mentioned in respect of the maintenance of the cables. No decisions have been made regarding the operation of the crossings once the concession ends, and therefore we are open to suggestions as to what might be the appropriate position at that stage.

In answer to the question about turnover at July 1989 prices, the present figure is about £648 million, against the final total of £995 million.

In conclusion, I thank not only the hon. Member for Newport East but Members of all parties who contributed to the debate. I and the Department recognise that this is an important issue for Welsh Members in particular. We are bound by the 1992 Act and the agreements entered into at that stage. Within that relatively tight constraint, I am willing to do what I can to address issues that Members have raised and I hope the House has found that helpful.