The Insurance Post's Motor Insurance Research for 2019 was recently released, giving an insight into the main issues in the motor insurance industry. We summarise some interesting points made by the Post's respondents below.
Motor Claims Inflation
The top four causes of claims inflation were said by respondents to be fraud, personal injury, credit hire and increased repair costs for technology incorporated into vehicles respectively.
Increased repair costs were a repeat theme within the top ten responses of the reason for claims inflation. The increasingly sophisticated technology incorporated into modern vehicles has raised both the cost of parts and the cost of labour, particularly as a lack of competition in the market for skilled workers keeps prices high.
The potential impact that Brexit could have on the cost of imported parts could compound this problem further. Further, delays in delivery could have knock-on effects on credit hire claims.
Despite the increased costs of repairs, almost two-thirds of respondents were positive about assistive technology. One respondent said their data showed a reduction to accident frequency and severity. Another was less complimentary of parking sensors which could be de-skilling drivers but did agree that automatic emergency brakes reduce risks.
Keyless Car Crime
This was ranked as eighth in the reasons for claims inflation amongst respondents which was surprising to the Post.
A recent ABI publication states that vehicle theft has increased by 50% over the last five years. The cost of vehicle theft increased by 29% in 2018 and the cost of motor claims generally increased by 6%.
Keyless cars are a major component of this trend. Thieves can unlock vehicles parked outside buildings by using devices to capture and boost the signal emitted from the car towards the building to engage with the key inside. The car is then unlocked and can be started without the key.
Civil Liability Act 2018
The Government has focused on reducing claims inflation / spend in recent years. Introduction of the claims Portals / extension of the fixed costs regime, changes to funding rules and the introduction of s.57 fundamental dishonesty rules are all examples and further changes are afoot in the Civil Liability Act 2018 ("CLA").
The CLA is anticipated to trigger various changes in the industry, with some notable examples being:
Further changes to the whiplash regime are approaching in 2020 when the tariff for whiplash damages is introduced and small claims track limit (and therefore amend the recoverable costs) is increased for RTA and EL/PL claims.
Respondents were mostly optimistic of the cost of whiplash claims falling although one respondent anticipated increased claims from litigants in person (with the incentive of retention of full compensation) so only a slightly reduced total cost due to the avoidance of legal fees.
The risk of fraud being displaced from RTA to other lines of business was also noted, as well as the potential for fraudulent claims to increase as instruction of lawyers decreased, thereby removing the current 'filter' for unscrupulous claims.
Claims Management Companies
Although respondents were optimistic about the number of CMCs reducing due to them being brought under the regulatory umbrella of the FCA as of 1 April 2019, it was commented that this may result in the growth of fewer but larger CMCs and/or expansion of their services to include dealing with low value claims, especially those falling within the expanded small claims track.
It is noted that the National Accident Helpline was given ABS approval in January this year.
This is still a significant burden in the industry and could potentially increase if Brexit triggers an economic downturn. Further cooperation between the industry, government and regulator was called for in order to further tackle the issue.
Most respondents said that this market had grown less than anticipated and it is clear that further work is required for availability and uptake of telematics policies to improve.
Some respondents' believe that uptake is low because customers value simplicity in policy models and do not want their driving habits or data to be monitored. On the other side of the fence, it is said that data collected by the industry has not been pooled efficiently.
Almost half of the respondents thought the rate would move to between 0.1% and 1% after the current review. Almost 30% of respondents expected the rate to remain negative, with just under 20% expecting the rate to be between 0% and -1%.
The latest review highlights some cause for optimism through the latest round of legislative and regulatory reforms, and the expected discount rate change. However, a slow take-up on telematics and rising repair prices due to increasingly sophisticated vehicle technology continue to put pressure on motor insurers.