From the supply of vehicle parts to Highly Automated Road Passenger Services, we offer our international experts' predictions on the opportunities and challenges that the motor insurance market may face in the coming year and beyond.
1. New trade rules with the EU may interrupt the supply of vehicle parts, increasing the duration and cost of vehicle repairs and credit hire claims
Any changes in the trading relationship with the EU as a result of Brexit will impact adversely on the supply of `just in time' vehicle parts both from manufacturers based within EU member states and countries outside the EU that have trade agreements with the EU. Such interruptions and delay in the supply chain will result in a lengthening of vehicle repair times which will in turn lead to an increase in the number and duration of credit hire claims adding to the cost of claims for insurers and, ultimately, consumers.
2. Mass market adoption of automated vehicles will take longer than previously predicted
A global audience of insurance professionals recently predicted that fully automated vehicles (AVs) will only become commonplace within twenty years, longer than previously predicted. Almost two thirds of delegates at the DAC Beachcroft/ Legalign Global event believed that the speed of technological advance, governmental initiatives and consumer appetite for more sustainable forms of transportation will lead to mass market adoption over the next two decades. Legal, technical and societal challenges, including public wariness of "new" technologies, remain significant as do matters of cross-border co-operation and compatibility. A widespread and multi-jurisdictional desire and willingness for advancement in these areas will result in an ever increasing level of certainty and reliability which will in turn address some of the public concerns in the technology and its usage.
3. The Government will come under increasing pressure to legalise e-scooters
Increased ownership and usage combined with the concomitant need for regulation and a desire to address environmental concerns including city air quality and pollution will increase the pressure on the Government to legalise e-scooters and similar personal light electric vehicles (PLEVs). E-scooters are legal in many other European countries including France and Germany and the UK Government has committed to conducting a review. With organisations such as Transport for London entering the debate in favour of legalisation, expect the current limitations on the use of such modes of transport to become less sustainable and justifiable. A formal legal structure for their use and regulation will be increasingly demanded by users, manufacturers and environmental campaigners.
4. Highly Automated Road Passenger Services will fundamentally change the insurance model
The adoption of a modern public transport system in which Highly Automated Road Passenger Services (HARPS) play a significant role will realise a number of social benefits in specific environments where the infrastructure allows. Private car commuters will be drawn by the ability to work and engage in productive tasks while travelling, while the young, elderly and infirm will benefit from improved independence. HARPS will accelerate the change from mass private vehicle ownership to mobility as a service, encouraging multiple occupancy ride sharing. Over time, this will reduce the number of vehicles on the road, improving congestion and air quality. Such societal changes will give rise to major challenges for the insurance industry, which will need to develop new products to meet the changing needs and demands of passenger service operators.
5. Free and easy to use portal will reduce the need for representation in low value personal injury cases
Backed by a user friendly portal, the simplified damages regime set out in the Civil Liability Act 2018, together with the limited costs environment created by an increase in the small claims track limit, will encourage considerably more claimants to act in person in low value personal injury claims. Some claimants will still seek services from or be farmed to solicitors and claims management companies, although the level of damages available may deter many from giving up a proportion to such firms. The rise of so-called professional McKenzie Friends may also be seen as providing services of limited quality, although the Claims Management Regulator is expected to crack down on such activity, which falls within their regulatory authority.
6. Objects in the rear view mirror may be closer than they appear
Insurers must be alive to changing behaviours brought about by the implementation of the whiplash reforms. In addition to new entrants, expect old players in the market, who have previously posed a threat, to reinvent themselves with new ways of making money under the new regime. There is already evidence of third parties providing solicitors with IT platforms designed to make running low value soft tissue injury claims viable under the reforms. It is likely that this will be a growth area and that it will not provide obvious benefits to consumers at either end of the claims chain.
7. Scottish future loss claims set to overtake England and Wales in value
Following the reports and recommendations of the Government Actuary, the jurisdictions of Scotland and England and Wales now have significantly different discount rates to be applied in the calculation of future losses, namely -0.75% in the former and -0.25% in the latter. This will result in the most severe injury claims being higher in value for the same injuries in Scotland compared to England and Wales. The opportunity for jurisdiction shopping that some have predicted remains very limited, as the rules as to applicable law remain clear. It is also worth noting that at the time of writing, the discount rate in Northern Ireland remains at the previous level of +2.5%: expect a change when the Northern Ireland Assembly is reinstated.