In this report we follow up the Government's response to our March 2011 report on the cost of motor insurance and also deal with new developments in this area, including the Government's decision to ban referral fees relating to personal injury cases.
In relation to the ban, we echo doubts expressed at Report Stage in the House about its efficacy, particularly once rules restricting the ownership of law firms are relaxed. However, we recommend that once the Bill is enacted the Government should prioritise the implementation of the ban on the receipt of referral fees, which could prohibit insurers from receiving referral fees across the board rather than only in relation to legal action. One way to help reduce premiums may be to consider whether the legal costs of low value claims processed using the pre-action protocol and online portal are reasonable. We recommend that the Government review how the protocol and portal have operated since they were introduced last year and publish the results within six months.
The rise in personal injury claims, most of which are for whiplash injuries, is the main reason for the rise in premiums. It is difficult to diagnose whiplash objectively and this has deterred insurers from defending claims in court. We recommend that the bar to receiving compensation in whiplash cases should be raised. If the number of whiplash claims does not fall significantly as a result there would in our view be a strong case to consider primary legislation to require objective evidence of a whiplash injury, or of the injury having a significant effect on the claimant's life, before compensation was paid.
We recommend that the Government send a clear message to the insurance industry that it expects the data protection legislation to be fully respected and we echo the recommendation of the Justice Committee that the stricter penalties for breaching the Act, passed by Parliament in 2008, should be brought into force. We also call on the Government to initiate an investigation of cold calling intended to generate personal injury claims, with a view to examining the legal and regulatory options for curtailing this activity.
The House recently agreed to a resolution on the cost of motor insurance based on our earlier report, which called for the establishment of a cross-departmental ministerial committee on reducing the cost of motor insurance and the publication of a plan for dealing with the different aspects of the problem. We call on the Government to explain how it will implement this resolution.
We also followed up our previous recommendations on uninsured driving and fraud. Earlier recommendations on young drivers will be followed up in our forthcoming inquiry on road safety.