There’s a great deal going on right now for car insurance companies and the spotlight is well and truly on the claims department. From changes in the Ogden rate to fraudulent claims, it looks like business may be on the up, or down, then maybe up again, for at least the next few months.
1. Fraudulent car insurance claims
The Association of British Insurers (ABI) reports that £25m of car accident claims are blocked each week, but that the figure is actually on a downwards trend – good news for car insurers who lose money in fraudulent pay-outs, and good news for the customers who see their premiums rise to reflect the cost of fraudulent claims.
The recent crackdown on fraudulent whiplash claims has already seen motor insurance companies reporting a 5% fall in dishonest claims, reducing premiums by an average of £35 a year, according to the ABI.
In addition, the amount of organised car accident fraud has fallen by a huge 30% due to a focus on the issue by special police investigations departments, the Insurance Fraud Bureau (IFB) and the Insurance Fraud Enforcement Department (IFED).
This is more great news for companies and customers who have to eventually take the brunt of the cost of organised car insurance crime.
2. More changes to the Ogden rate
It can’t all be great news though, and another hot topic in the world of motor car insurance is the upcoming decision to change the Ogden rate, which was already adjusted from 2.5% to -0.75% last February, driving up costs for companies and customers alike. The Ogden rate is the Discount Rate used to adjust compensation for life-changing injuries from a personal injury claim to ensure that claimants are not compensated too much or too little.
Professional services firm, EY, suggests that the change has already cost insurers upwards of £3.5bn, and that many companies have already begun restructuring their claims to reflect this.
Of course, this means that eventually the cost is passed down to consumers, upping their premiums and making everyone a little more out of pocket. It remains to be seen how any further changes may affect the motor insurance market and whether these underwriting losses will continue once the final decision over the Ogden rate is made.
3. Campaigners call for motor insurance companies to change repair rates
Recent news has put a spotlight solidly on motor insurance company repair rates, with campaigners claiming that the system is unfair.
Campaigners are claiming that motor insurance companies charge one repair rate for an ‘at fault’ driver, and one for a ‘non-fault’ driver, and that the difference could add up to an extra 100% of the cost for ‘at fault’ drivers. This, they say, could be driving up the cost of car insurance for motorists across the country.
While the practice was found to be lawful in 2014 by the Competition and Markets Authority (CMA), there is increasing attention being brought to the issue by MPs and organisations such as the National Body Repairers Association, indicating that the problem is yet to be completely resolved.
Motor insurance companies will need to address these concerns if they are to continue receiving good feedback from customers and campaigners alike.
With so many different influences, it remains to be seen what the next few months hold for the car insurance industry, but we’ll keep you posted as it looks like it may be a bumpy ride!