Transport Secretary Louise Haigh (pictured above) and Economic Secretary to the Treasury Tulip Siddiq will convene industry groups and consumer organisations today, including the Association of British Insurers, Citizens Advice, Which?, and Compare the Market, along with insurance regulators, to address the rising costs of car insurance.
Motor insurance premiums have increased by an average of 21% since June 2022, according to analysis from the Financial Conduct Authority (FCA). This rate of growth exceeds that of other major European economies, such as Germany, France, Spain, and Italy.
The government has reaffirmed its manifesto commitment to addressing rising consumer costs, which it states are hindering economic growth.
As part of these efforts, a new cross-government motor insurance taskforce will be launched today by Haigh and Siddiq. The taskforce, supported by industry experts, aims to reduce the cost of car insurance by identifying the factors driving up premiums and proposing solutions to control costs.
Key issues contributing to the increase in motor insurance costs include inflation, rising vehicle thefts, and poor road conditions, with the government pledging to repair up to 1 million potholes annually as part of its plan to address the issue.
The taskforce will also focus on groups disproportionately affected by high premiums, including younger and older drivers, those from ethnic minority backgrounds, and individuals on lower incomes.
Haigh emphasised the importance of car insurance, stating that it is essential for accessing economic opportunities.
“That’s why we’re taking direct action to bring insurance companies and regulators round the table to discuss how we can crack down on spiralling costs,”
Haigh highlighted that while the increasing costs of car insurance affect all drivers, certain groups have been particularly hard hit. She stated that the government is determined to ensure all drivers receive a fair deal, regardless of their background or circumstances.
“Our new expert taskforce is a major step forward in delivering a fair deal for drivers. It will give this issue the attention it deserves – rooting out the factors driving up costs for industry and ensuring drivers are able to hit the road,” Haigh said.
The taskforce will draw on expertise from regulators, motoring organisations, insurers, and consumer advocacy groups to tackle the issue of high insurance costs.
It will also assess whether consumers are receiving fair value for money and examine the impact on those most affected, with input from the FCA and the Competition and Markets Authority (CMA).
The government views the taskforce as part of its broader efforts to stimulate economic growth and reduce barriers to opportunity, particularly by addressing the financial pressures facing both the insurance industry and drivers.
Colm Holmes, CEO of Allianz UK and chair of the ABI sub-board committee on motor insurance affordability, commented on the new government taskforce.
"The cost of insurance has become a headache for many motorists who are struggling with wider cost of living pressures. The problem is compounded by a range of factors, including an increase in the number of accidents in recent years, the cost of repair rising at above the inflation rate, the prevalence of insurance fraud and motor theft, as well as the poor disrepair of our roads,” he said.
Holmes also noted that the taskforce is a positive step forward, as it allows for more progress on the issue as the industry, regulators, and government work together to address it.
“Though premiums are showing signs of falling, we want to ensure that direction of travel continues, and so we look forward to helping the taskforce explore all the challenges,” Holmes said.
Commenting on the launch of the Government taskforce, Matthew Maxwell Scott, executive director of the Association of Consumer Support Organisations (ACSO) said it is: “regrettable that the promised CMA/FCA investigation, which would have been properly independent, has been shelved in favour of a largely industry-led approach.”
“Why ask the ABI to be at the centre of an investigation into its own members’ pricing behaviour? I have little doubt that they will blame everyone in the claims supply chain for their own strategic failures.”
Maxwell Scott highlighted how customers have paid the price of soaring premiums and that, given motor insurance is a compulsory product, insurers must be far more transparent on pricing with regard to both investment returns and the profits they make from customers who pay their premiums on a monthly basis.
He noted that consumer groups including ACSO will do everything they can to participate in the process of the taskforce.
“We also call on the taskforce to explore whether insurance offers good value for money at the point of claim, especially as the data shows fewer claims being made, despite rises in road usage post pandemic and accident rates are at similar historic levels,” he said. “High prices will have almost certainly increased the number of uninsured drivers on our roads, which is understandable given the soaring cost of insurance, and must be addressed including through robust police enforcement and better data sharing.”
Also commenting on the taskforce was Anthony Hughes, chair and CEO of the Credit Hire Organisation (CHO), who said it is “odd” that the members of the taskforce investigating the high cost of motor insurance include motor insurers.
“Labour made clear their intention to look at this issue before the election, so it’s no surprise that the new government has honoured its commitment,” he said, but questioned: “If the industry investigates itself how do you avoid the outcome being skewed?"
"The CHO looks after nearly 500,000 people a year who need a car to get to work, or take their kids to school, following an accident,” he said. “The cost of providing that service was calculated by the CMA to have been less than £5 on the cost of a motor insurance policy, which shows that we are a very small part of the overall indemnity spend."
"Additionally, for the last 12 months we’ve been engaged in productive negotiations with our insurer counterparts to revise the GTA (a protocol which seeks to reduce friction in the credit hire claims process) and we are hopeful that we will agree a revised GTA that will equip the industry to process claims efficiently in a volatile and ever-changing market.”
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