Whiplash curbs could hand insurers £1bn-plus profit boost
Motor insurers would net an annual windfall exceeding £1bn from fresh curbs on the rights of injury victims – if the industry booked as profit the savings it says it will make from reform.
Industry data shows that the £50 per premium saving promised by the government could yield a massive boost to insurers' bottom lines.
In his autumn statement, chancellor George Osborne pledged to end the right to cash compensation for minor whiplash injuries and raise the upper limit for personal injury claims in the small claims track from £1,000 to £5,000.
Over Christmas the Ministry of Justice announced that leading motor insurers had promised to pass on to customers 100% of the savings they make from curbs on whiplash claims – estimated at up to £50 per motor premium.
Last week, however, both the government and trade body the Association of British Insurers admitted there will be no industry audit to confirm that insurers keep that promise. This has inevitably led to concerns that there is nothing to stop insurers simply booking the ‘savings’ as extra profit – at a time when the average motor premium is soaring once again.
The ABI’s own statistics show that in 2012, the latest year for which data are available, 19.6m UK households had motor insurance. Multiplied by £50, and assuming that each household has just one premium, that would mean a potential boost to profits totalling £980m.
In fact the average household in Britain has two cars – suggesting the windfall could be hundreds of millions of pounds higher.