This must be one of biggest con-tricks ever seen in the financial services sector.
The warning today from AA Insurance that motor insurance premiums could ‘bounce sharply up again’ this year shows just how little control the government really has over its friends and Party funders in the insurance industry, says Thompsons Solicitors.
With whiplash claims falling and one leading insurer saying it had increased profits because of ‘excellent’ claims experience, motorists have been left wondering what stands in the way of the modest fall in premiums seen in the last 12 months being maintained and even increased.
The glitch comes from the AA’s Simon Douglas, in an interview today with This Is Money, when he says the fall in the cost of premiums will ‘end with a bump’.
He is reported to have said: 'That would…confound Ministers who have been taking some of the credit for falling premiums. And it will perplex drivers who thought that premiums were returning to a more realistic level.’
Premiums went up 40% two years ago as insurers stirred up a scare about Britain being the whiplash capital of Europe. But car insurer provisions for personal injury claims were inflated, and 2013 saw them release £millions from their reserves to fund big pay-outs to shareholders.
“This must be one of biggest con-tricks ever seen in the financial services sector – and that’s saying something,” said Tom Jones, head of policy at Thompsons Solicitors.
“The car insurers have been lobbying hard for restrictions on access to justice for motorists premised on a ‘crisis’ - and the government has willingly obliged – whilst at the same time they have been reporting huge profits and paying out substantial dividends.
“Admiral and Direct Line alone, the two market leaders, paid dividends totalling £478m in 2013 – that’s equivalent to £63 for each and every customer. So the so called crisis looks more than a little overblown.
“Increasing premiums whilst paying out so much to shareholders would have been a little too unsubtle, so instead the trimming of premiums has been modest by the big players but sufficient, they hope, to achieve their real aim of increasing market share among ‘low risk’ motorists.
“The AA warning that premiums could go up again sharply later this year just shows the games that are being played whilst the government stand by waiting to do the insurers next bidding.
“Car insurers are themselves calling the current motor insurance market an ‘excellent’ claims environment and yet motorists are being cut out of any real share of the benefits.
“The House of Commons Transport Select Committee has asked the government how it will monitor whether or not insurers pass on cost reductions to consumers and, since every stage in this insurance industry created crisis shows that you can’t rely on the insurers, what is needed is more transparency and accountability to protect consumers in a captive market.”
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