Cost of motor insurance: follow up - Transport Committee Contents

Conclusions and recommendations


1.  Where someone can demonstrate that they have suffered an injury, including whiplash, as a result of a road traffic accident for which they were not fully liable they should be able to claim and receive compensation. However, in relation to whiplash, we are not convinced that a diagnosis unsupported by any further evidence of injury or personal inconvenience arising from the injury should be sufficient for a claim to be settled. In our view, the bar to receiving compensation in whiplash cases should be raised. If this were possible by means of an insurer taking a case to court and establishing new case law we suspect this would already have happened. We note the Government's argument that its legal reforms should reduce the money in the system and encourage insurers to defend claims more vigorously. If the number of whiplash claims does not fall significantly once these changes are implemented 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. (Paragraph 8)

Referral fees

2.  Although we welcome the Legal Services Board's new guidance on the transparency of referral fees, it does not go far enough. Firstly, it relates to fees paid by solicitors but leaves untouched the fees paid by others involved with motor insurance claims, such as garages and credit hire firms. Secondly, we are disappointed that the Government has not given a stronger signal that more transparency is necessary. We recommend that this is done, for example by Ministers setting out the information they think insurers should provide to consumers and drawing attention to examples of good practice. Thirdly, we are disappointed that the insurers, who have complained about the dysfunctionality of the current system, have not done more to improve it. Our recommendation about transparency was met with silence from the insurers, which perhaps tells its own story (Paragraph 12)

3.  Despite these doubts, we note the swift action taken by the Government to tackle this issue and make two recommendations. Firstly, once the Bill is enacted, we call on the Government to prioritise the implementation of what was new clause 20 in the Commons, Regulation by the FSA, which could prohibit insurers from receiving referral fees across the board rather than only in relation to legal action. (Paragraph 17)

4.  Secondly, 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, looking in particular at how the fixed costs associated with the protocol relate to the actual cost of the work involved and whether use of the protocol acts as an incentive for insurers to concede claims which ought to be defended. This review should be conducted and its results published within six months. (Paragraph 18)

5.  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. (Paragraph 21)

6.  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. (Paragraph 22)


7.  We recommend that the Government provide us with updated information on the timetable for its project to enable insurance firms to gain access in real-time to the DVLA database. (Paragraph 25)

Uninsured driving

8.  We recommend that the Government keep us informed of its review of the penalties associated with motoring without insurance. (Paragraph 26)


9.  We recommend that the Government provide us with a written response to the House's resolution [on the cost of motor insurance] setting out how it will be implemented. (Paragraph 29)

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Prepared 12 January 2012