Cost of Motor Insurance

Julie Hilling Excerpts

Tuesday 8th November 2011 Commons Chamber

[Julie Hilling (Bolton West) (Lab)]

As a member of the Transport Committee, I, too, pay tribute to our Chair, my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), for leading the debate. The ever-rising cost of motor insurance simply cannot continue, and it is the only insurance that is compulsory. It is up to an individual, and perhaps their mortgage company, to insure their house, their holiday or anything else, but the law states that we must insure our cars and motorbikes; we are a captive audience. That is why it is absolutely right to debate the issue this evening.

Insurance premiums are bad enough for mature motorists, but for young drivers they are frankly ridiculous. They lead to young people finding solutions that are against the law. Research from the AA shows that more than a fifth of drivers under the age of 25 are prepared to break the law to avoid high insurance premiums. It shows that 21% would consider driving without insurance, 42% have changed the information they provide to an insurance firm to qualify for a cheaper policy, 22% have added another driver to their policy, 15% have changed whether they were the main driver, 3% have changed their employment information and 2% have changed information about their address.

All over the UK, otherwise law-abiding citizens are breaking the law to get affordable car insurance. For example, cars belonging to young people are being insured by their parents, with the parents registered as the main driver even though they never drive the car. Tragically, if one of those young people has an accident, their claim might not be met by the insurance company. It is bad enough to lose their car and possibly be prosecuted, but what about the person they might hurt?

Some young people are finding unique ways of overcoming the problem. For example, 18-year-old Chris Berry from Bolton was quoted £17,800 to insure his P-reg VW Polo. He is now using a 1953 Fordson Major tractor to get around, with an insurance premium of £57 a year. He said:

“If I had the choice, I’d have my car—I can go further in it and it would be much better in the rain. If you are image conscious, I don’t think you would drive the tractor…but it can go 40 mph on a good day”

He also told The Bolton News that the insurance company rang him up after he received the quote for nearly £18,000 to ask him whether he wanted to take it out. He said:

“I told them they were having a laugh—it’s a Polo, not a Ferrari”

Of course, no insurance company would offer him any sort of quote if it was a Ferrari.

[Jim Dowd]

I just want an assurance that he is not using red diesel for non-agricultural purposes.

[Julie Hilling]

I do not think so, although perhaps that is worth investigation.

We have heard much over the past few months about referral fees, which the hon. Member for Milton Keynes South (Iain Stewart) mentioned. I am sure that other hon. Members will talk about that in detail, so I will confine my remarks to just a few points. I believe that referral fees must be stopped, but they should be stopped for the whole of a motor claim, not just the personal injury part. I also believe that the money paid to solicitors in the motor insurance portal should be reduced to an amount that simply covers the true cost of dealing with a case. While there is spare money in the system, there will always be a tendency to find another way of bypassing the ban. For instance, there is money to be made in referring claims for vehicle repairs. The Committee also heard about how credit hire cars are supplied to accident victims, rather than normal hire cars, which are much cheaper. We heard how insurance companies will pass claims to claims management companies, thereby building more costs into the system.

Although I agree that referral fees should be banned, the insurance industry should do more to tackle the situation. I challenged a number of insurance companies and their professional bodies to look to themselves for solutions. Whenever I have been involved in a claims situation, my first port of call has always been to my insurance company. Perhaps naively, I have expected it to sort the situation out. In times gone by there was the “knock for knock” policy; one’s insurance company funded the repairs to the vehicle, even if the fault was with another driver. I am told that the increased number of insurers in the industry and its internet basis stopped that policy.

The last time I had to use my insurance, I was clearly sold to a claims management company. Instead of the normal car hire company, I had a credit hire car, although I did not know anything about that at the time. I was contacted many times to claim for the “injuries” I had received, even though I had been sitting in my living room when someone drove into my car. Why did my insurance company not provide the necessary services itself and charge the other person’s insurer, or pass my case on to the other insurer to deal with?

I also believe that insurance companies could do far more to reward good drivers. The Pass Plus scheme was introduced to give additional post-test instructions to novice drivers, such as motorway driving, driving at night, town centre driving and so on. Initially that reduced premiums, but it seems that people with Pass Plus are no longer being rewarded. We have been told of schemes that can introduce technology into cars to show if a person is driving safely, for example when they are driving within speed limits and whether they accelerate and brake gently. I believe that the insurance companies should do more to promote such schemes.

We have been told about the very high propensity for young drivers to have serious accidents, but in truth it is not young drivers but young, male drivers, and I regret the European ruling that insurance premiums should be equalised for men and women. Insurance has always been based on risk, and it seems perverse that the ruling will end up costing women a great deal more because of the risky behaviour of men and, particularly, young men.

More regulation should therefore be introduced for novice drivers, and I should welcome a mandatory “newly qualified” plate, which exists in other European countries, because it would have two advantages. First, it would warn experienced drivers that the person in front just might do something a little out of the ordinary. Indeed, I remember the first time that I drove alone, along a country road, and a lorry decided to overtake me. I was absolutely terrified, but I am sure that the driver would have thought twice if he had realised that I had passed my test only the day before.

Secondly, the plate could be used to identify drivers on the road in order to enforce other restrictions that should be in place. We hear tragic stories of young people losing their lives or having life-changing injuries after car accidents, and normally the driver is found to be alcohol and drug-free, but I suspect that they are fired up on testosterone. Young drivers should not be allowed to carry backseat passengers, and we should investigate other restrictions to make our roads safer.

I hope the Government make rapid progress on making the driving test more rigorous and on ensuring that all drivers are prepared for many more of the situations that they find on the roads.

I was alarmed to find out recently that about 10,000 people are driving on our roads with more than 12 points on their licences, so I urge the Government to investigate that urgently and to take action. Previously, there was an effective carrot and stick: if someone built up their no claims bonus, they got cheaper car insurance; if they got endorsements or points, their insurance premium went up; and if they got three endorsements or 12 points, they lost their licence. We need to do more to ensure that good drivers can afford to drive, and I hope that the Government will take urgent and comprehensive action.