The cost of motor insurance - Transport Committee Contents

Written evidence from (CMI 32)


Employing over 1,000 people, started trading in June 2005 and was born out of a desire to revolutionise the general insurance market. In addition to car insurance, offers insurance products for home, travel as well as pet cover and is Britain's only insurance company without call centres. This allows cost savings which are passed directly on to the customer, keeping premiums low.

In 2007, AXA UK acquired It is now a wholly owned subsidiary of AXA Insurance UK PLC which forms part of AXA Group.

In 2008, achieved over half a million live policies and, in May 2009, it sold its one millionth policy. It is considered to be one of the fastest-growing insurers in the UK.


Following on from the initial consultation in November 2010, is submitting its findings to foster lower premiums for UK motorists.

Before doing so, recognition of the key areas raised by the Committee is important. These include:

  1. ¾  Uninsured drivers.
  2. ¾  Insurance fraud.
  3. ¾  Claims management firms/personal injury claims.
  4. ¾  Legal costs. recognises and supports the important action needed to address these fundamental issues and welcomes change for the benefit of UK motorists and insurers. However, there are other key areas which need consideration. These include:

  1. ¾  Vehicle recovery fees.
  2. ¾  Further areas of insurance fraud.
  3. ¾  Further areas of claims management firms.
  4. ¾  Insurance policy verification practices.


Building on the insurance fraud issues raised by other parties, has highlighted some of its own programmes which are currently in practice to help lower premiums. is tackling insurance fraud:

  1. ¾ operates a dedicated department to investigate all suspected fraud and all reported car thefts.
  2. ¾  The team has been in place for two years.
  3. ¾  It has allowed the business to save at least £4 million this year by rejecting fraudulent claims during this period.
  4. ¾  By adopting this tactic as well as other anti-fraud measures, will save all of its policyholders an average of £10 per policy next year.

However, more support and co-operation across the industry in such strategies would be welcome. believes that other insurers should be as proactive and invest accordingly in fighting potentially fraudulent claims. The insurer also believes that stricter action is needed by the courts in bringing these fraudulent claimants to justice rather than simply writing off the claim and allowing the fraudster to go free and potentially re-offend.

Credit hire

The detrimental rise of personal injury claims and the growth of claims management firms in the car insurance industry is well documented. However, is also proactive in challenging the exorbitant fees being billed by companies known as credit hire companies. also operates a number of other initiatives in order to allow the company to maintain its low premium offer. This has become more and more challenging each year.


4.1  Recovery fees

Between August and September 2010, began researching the fees collected by local police forces for collection of vehicles which have been deemed unfit to drive following an accident or breakdown.

Typically, when a car has been classified in this way, the regional police force will arrange for a local recovery firm to collect the vehicle. For doing so, the police will collect a "commission" fee.

When the insurer - or another - is told about the collection, it has to arrange a further collection of the vehicle from a recovery centre, owned by a third party. This incurs additional, unnecessary costs to the insurer and therefore policyholders which can be avoided.

The results were startling with huge disparity across the UK. Of the nine police forces approached through the Freedom of Information Act, seven revealed their fee structure to us. Two declined on grounds that it would "damage their third party relationships". The results are as follows:
Police Force Referral FeeReferrals in 2009 Referrals in 2008
West Midlands Police£25 24,89128.952
Northumbria Police£21 10,2209,763
Thames Valley£6 15,71619,641
Lothian & Borders Police£6 Information not held Information not held
South Wales Police£5 10,06711,951
Greater Manchester PoliceDecline [9] 32,85537,884
Merseyside PoliceDeclined [10] 1,2631,529
Metropolitan PoliceNo charge [11] N/AN/A
Strathclyde PoliceNo charge [12] N/AN/A

It is evident that a simple recommendation on best practice is needed. We, through our public relations programme, have worked hard to highlight the issue to the public; however, the police forces need to adopt a new way of working. There will be significant savings to the industry by requesting the owner of the vehicle to notify their insurer of the need for collection instead of third party involvement - understanding that some smaller insurers may not be able to offer this kind of service.

4.2  Fraud

4.2.1  Low-impact claims

Small injury claims caused by low-impact accidents have been a growing trend due to the growth in the claims management sector as well as the everyday financial pressures of life. It is important to highlight the effects of the regionalisation of successful claims and, therefore, the need for a polarised approach.

This problem is nationwide but is more evident in specific regions. Many insurers know better than to dispute a small injury claim simply because it would be uneconomical and a waste of resource, even when it is clear that the injuries claimed are simply impossible. This has had a significant impact on premiums both nationally but more specifically, on those regions seen as "soft touches". Lawyers of claimants intentionally bring cases to specific courts, because they know that they are more likely to get a favourable result. would welcome debate on this area and would be willing to set out an action plan to tackle the issue if the Committee wishes it to.

4.2.2  Passenger numbers

The average number of passengers per accident per car has risen from 1.1 persons to 1.7 persons in recent years. There may be a number of factors for this such as an increase in younger drivers transporting fellow youngsters; however, a rough rule of thumb, whereby a typical claim per person runs at £5k, means the additional "half a person" has added approximately £2.5k to each claim, which has inevitably had an effect on premiums.

4.2.3  Verification practices

Currently, when an individual applies for car insurance, there is no way of checking that vital information - such as holding a driving licence - can be verified by an insurer unless that person is involved in an accident. The DVLA hold this information but are reluctant to give out licence info because of the Data Protection Act.

This is a major hurdle for insurers and having this barrier in place means that insurers are forced to treat every applicant as a risk as there is no way to check driving history. Consequently, premiums across the board have increased to accommodate that risk. It means that those millions of honest drivers across the UK are victims of those who apply fraudulently. would like the DVLA to work in partnership with them and other insurers and to provide information on type of licence and the convictions they have on record.

If a verification model was in place, all drivers would be evaluated fairly which would allow "good/truthful" drivers to be rewarded with lower premiums. Again, this is a simple issue which can be rectified by introducing a free of charge, automated checking process between insurers and applicants.


The rise in claims management firms is again well documented. However an area feels strongly about hasn't been raised to date. The fundamental practice of these types of businesses is somewhat questionable. The first task they face is to obtain information of individuals who have been involved in an accident in the past three years. They do this through a number of means whether that's random text messages or e-mail to consumers, or even through direct requests with insurers requesting data. has been approached by a number of these firms and all such requests have been strongly rejected.

The practice of obtaining clients by claims management firms should be questioned.

  1. ¾  The tactic of approaching insurers should be made illegal.
  2. ¾  The tactic of encouraging those involved in accidents to re-evaluate their physical condition, in some cases years after the close of an incident case, should be strongly discouraged or made illegal.
  3. ¾  At the very least, once a claim has been concluded and closed, it should not be allowed to be reopened due to a claims management firm's request.

There needs to be a review of these types of companies alongside strict practice guidelines. With so many claims now being reopened, insurance companies have had to reopen their financial yearbooks which has had a financial impact on the industry. Therefore a rise in premiums is necessary to rectify this financial disparity.


There have been some fundamental issues raised by the Committee but there are further issues which, if addressed, would have a significant positive effect on car insurance premiums. has been and always will be active in seeking ways in which to keep premiums low and the above outline of issues, alongside suggestions to tackle such issues, should have a positive effect on costs to the driver.

We look forward to your feedback. We would welcome further involvement with helping to reduce premiums for the benefit of UK motorists.

December 2010

9   West Midlands Police stated that not all of the referrals for 2008 and 2009 attracted a referral fee. Back

10   Greater Manchester Police confirmed that it does receive referral fees, but refused to disclose the amount, stating: "The most persuasive reason for disclosure is accountability, which needs to be compared to the strongest reason for maintaining the exemption, which at this time is the damage to the Commercial Interest of Third Parties. Merseyside Police also confirmed that it receives referral fees but refused to disclose the amount for the same reasons. Back

11   Neither Metropolitan Police nor Strathclyde Police receive referral fees from recovery companies. However, the cost of recovery by third party firms in these areas will still be passed on to insurance companies. Back

12   Neither Metropolitan Police nor Strathclyde Police receive referral fees from recovery companies. However, the cost of recovery by third party firms in these areas will still be passed on to insurance companies. Back

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