Additionally, this quarter features an article by Joanne Baker, Partner, discussing the Whiplash Tariff and related issues.
Lastly, Nigel Teasdale reviews the recently concluded government assessment of medical reporting in the low value sector.
Motor Taskforce: Government takes aim at the cost of motor insurance.
Over recent years, the cost of motor insurance in the UK has been on an upward trajectory, in particular for young drivers and those living in less salubrious areas. The Q3 2024 data held by the ABI showed an average premium cost of £612, a 2% drop on Q2 but 9% higher than the same period in 2023. The situation is much worse for young drivers with premiums for 18-year-old averaging over £2,000.
The Labour Party manifesto included a pledge to support drivers by tackling the soaring cost of motor insurance. Subsequently the government reinforced that commitment to look at motor insurance and the reasons why premiums are so high, announcing the motor taskforce in October 2024. If the industry doesn't self-regulate to bring premiums down, there is the threat of government intervention on the horizon.
Since the taskforce was announced the average premium levels have dropped due to what might be considered a natural correction in the market. Confused and WTW research indicated a 16% drop over the course of the calendar year which represents the largest reduction since 2014. We await the ABI Q4 data next month to confirm the position.
Membership
The taskforce was to be chaired by Louise Haigh MP, who has since resigned her post. Having written to the transport minister, we understand that the new chair is likely to be Lilian Greenwood MP, Minister for the Future of Roads, with Heidi Alexander MP (new Transport Minister) also representing the government. Tulip Siddiq MP (Treasury) was another minister representing the government, although she has also just resigned, and we await further news on her replacement on the group. Emma Reynolds has replaced Tulip Siddiq at the Treasury, but we are yet to have confirmation as to whether she will sit on the group. Watch this space!
Beyond that, the government has invited representation from consumer groups and industry experts. Members include the ABI, CMA, FCA, MOJ, MIB, Citizens Advice, Which, Compare the Market, BIBA and the Society of Motor Manufacturers. We have been given an indication that at the appropriate time, the taskforce will reach out to a wider community, including legal. We had written to Heidi Alexander to confirm our interest but received a response from Lilian Greenwood, who will contact us again at the appropriate time.
Remit
The taskforce will investigate why premiums are so high and look for potential solutions. While some of the current members have investigated the cost of motor insurance before this appears to be the most 'joined up' investigation to date. Whilst external factors such as claims inflation, theft, vehicle safety and the state of UK roads will be considered, we understand the focus will also be on the high cost of repairs, credit hire, personal injury and fraud. It is likely that the functionality of the insurance market will be looked at again, this time in the light of new Consumer Duty Regulations.
Potential solutions?
From a claims perspective, some steps have already been taken which will go towards reducing premiums, the most important being the new Discount Rate, standing at 0.5%. Others that are yet to become fully effective include the increase in fixed costs for claims up to 100K.
Raising the small claims track limit, bringing all soft tissue injuries into a tariff system, intervention in credit hire and obligatory telematics for young drivers may well be areas for discussion and reform. The government’s pledge to fix one million more potholes will undoubtedly have a positive impact, with studies showing up to one in five cars are written off after colliding with one.
More radical steps could happen if self-regulation does not work.
Timescale
The taskforce aims to complete their work by the end of Summer 2026 which may be optimistic given the changes at Ministerial level. The initial meeting in October 2024 was very much introductory and whilst we understand that a second meeting was planned for January 2025, no further details have been given. The reduction in premiums due to the natural correction in the market, alongside the changes in personnel, may mean some of the urgency has dissipated. We will continue to keep an eye on developments.
Further key commentary
Joanne Baker Partner, discusses the Whiplash Tariff and related issues here.
Nigel Teasdale Partner, reviews the recently concluded government assessment of medical reporting in the low value sector.
