We won’t intervene over insurance prices, admits Treasury
Topics: Government & politics
The Treasury has admitted that it has no intention of intervening to force insurers to pass on savings from whiplash reforms.
The reforms include plans to increase the small-claims limit for personal injury claims to £5,000, as well as scrap general damages for RTA soft-tissue injuries.
They reforms are largely founded on the expectation - and in two insurers’ cases a public pledge - to pass on 100% of resultant savings to consumers in the form of lower car insurance premiums.
A Ministry of Justice press release last month said the move would cut annual insurance premiums by around £50.
But a written parliamentary answer to a question from shadow justice minister Andy Slaughter has revealed the government has no mechanism in place to actually enforce the promise.
Treasury minister Harriet Baldwin said the pricing of insurance products is a ‘matter for individual insurers in which the government does not seek to intervene’.
She added: ‘The motor insurance market is intensely competitive and the government therefore expects that the insurance industry will pass on savings to consumers.’
The Association of British Insurers said it has no remit to set its members’ prices, but would rely on the competitive insurance market to keep premiums down.
A spokesman said: ‘Insurers have been delivering on their promise to pass on savings made to customers following the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act reforms.’
But research released from the comparison website Confused.com said car insurance premiums saw their biggest annual rise since 2011 in the final quarter of 2015.
Motorists are now paying on average £78, or 13.2%, more than they were this time last year, leaving the average premium for a comprehensive policy now at £672.
Tom Jones, head of policy at claimant firm Thompsons Solicitors, said the government has no intention of making the insurance industry do anything, instead relying on ‘volunteers’ to pass on savings.
‘Rather like Lord Nelson in the Battle of Trafalgar, the government "expects" the insurance companies to do the right thing,’ he said.
‘It’s one thing for Nelson to have expectations of those in uniform serving their country in the heat of battle but George Osborne needs to accept that it’s rather different when you are talking about insurance companies whose first master is their shareholder.’