Insurance companies should and could do more to stop people driving without a licence, the Motor Accident Solicitors Society (MASS) has told a House of Commons inquiry into escalating motor insurance costs.

In its written submission to the Transport Committee inquiry, MASS said that uninsured drivers cost the industry £500m a year, adding £30 to the average motor insurance premium. The Association of British Insurers (ABI) told the inquiry that legal fees add £40 a year to premiums.

MASS, the only lawyers’ association among the 21 bodies that provided written evidence to the inquiry, said that a significant rise in accident claims over the last nine years should be of more concern to insurers than the level of legal costs for each claim. It said insurers could discourage driving without insurance by lowering premiums for young drivers with a good driving record under a parent’s policy, and allowing them to transfer claim-free years to their own policy.

Insurers’ groups told the committee that legal costs have spiralled out of control, and that the proliferation of claims management companies has fuelled a rise in claims.

The Transport Committee is investigating the reasons behind recent increases in the cost of motor insurance and the extent to which this is influenced by legal costs, among other things. At an oral evidence session last week, committee chair Louise Ellman criticised ‘a merry-go-round of referrals’ and the practices of some claims management companies in sourcing claims. She said that the committee has ‘received evidence that suggests that [claims] websites encourage people not to give full disclosure of their situation.’

In its written submission, the ABI said: ‘Bodily injury claims are often characterised by disproportionate legal fees which mean that, for low-value claims in particular, more money ends up in the hands of claims management companies and lawyers rather than with the injured. The proliferation of claims management companies in recent years is also fuelling claims inflation.’

Written evidence was taken between 19 October and 1 November.