The failure of two of the big four car insurers to divulge separate trading figures for motor insurance sales in the UK appears to be a clear breach of International Financial Reporting Standards (IFRS), according to a new report published today by Thompsons Solicitors.
AVIVA and AXA do not reveal the profit they make from UK motorists, but close scrutiny of their group accounts by Thompsons suggests car insurance contributes more than 10% of their overall profit – triggering a requirement under IFRS to divulge the figures separately.
“At a time when there is intense debate about the cost of motor insurance, the public has a right to know how much profit the car insurers are making,” said Tom Jones, Head of Policy at Thompsons.
“We know from published accounts that Direct Line and Admiral have been enjoying a profits boom and have paid £478m in dividends to shareholders in the last 12 months alone – equivalent to £63 for each of their 7.6 million policy holders.
“Whilst the Direct Line and Admiral dividends are outrageous at a time that the industry says it is in crisis, AXA and AVIVA won’t even divulge their profit figures. They are so secretive they only make passing mention in shareholder communications of ‘good’ or ‘improving’ profitability in the UK car insurance market.
“AVIVA and AXA can’t have it both ways. They complain endlessly about ‘compensation culture’ and ‘whiplash fraud’ and demand government measures that would hit access to proper justice for injured people with genuine claims. Yet, at the same time, they are not prepared to come clean on how lucrative this captive market is for them.”
The new Thompsons report on car insurance, which has been submitted to the House of Commons Transport Select Committee, proposes measures to ensure greater accountability and transparency to protect consumers in a market now dominated by four major players. The measures include:
- Setting minimum product and service standards
- Proper disclosure of financial and trading information
- Independent information for accident victims on their legal rights
The report follows a letter from the chair of the committee, Louise Ellman MP, to the Secretary of State for Justice, Chris Grayling MP, asking the Government to explain how it will monitor whether or not insurers will honour their commitment to ensure any cost reductions from legal reforms are passed through to consumers.
“The evidence we have compiled in our report shows the car insurers can’t be relied on to pass savings on to motorists in the form of lower premiums. They are very good at collecting in the premiums and paying out dividends to the shareholders but much less willing to reduce those premiums even if their profits suggest they could,” said Tom Jones.
“There needs to be a fair and transparent system for ensuring that all providers of what is a legally-required purchase are accountable and meet minimum standards.”