ABI says arrangement will slash fraud, with insurers able to check for driving offences

The ABI has overcome a previous row with the DVLA to agree funding for a fraud-busting project that will give the insurance industry electronic access to the licensing agency’s driver database.

An ABI spokesman said that the final form of the insurance industry’s access to the DVLA’s database had not been decided, but that it would be a system that asked drivers for their driving licence number when they applied for insurance.

This will remove the need for motorists to volunteer information about their driving, such as whether they hold a valid licence or have any penalty points. 

ABI director of general insurance Nick Starling said this would slash application fraud. Around 16% of drivers lied on their motor application forms in 2010, according to the most recent ABI and DVLA research.

In February this year the project was halted by a row over which side will pay, according to roads minister Mike Penning. This led the DVLA to abandon its initial plans to open the database by the first quarter of 2014. But now the ABI has thrashed out a five-year funding deal and expects the database to launch in early 2014.

The ABI would not reveal how much the insurer-funded project would cost, but its development had cost £870,000 up to August 2011 after three years of design.

Sabre boss Keith Morris, who has been involved in ABI discussions with the DVLA, said that once the project was live it could be funded by a levy on motor insurers based on their gross written premiums.

Motor Insurers’ Bureau chief executive Ashton West said that many drivers understated their driving history when buying motor insurance. “The industry is losing that money,” he said, “and the consumer loses out, as they are ultimately picking up the bill for the claims cost of those people that are under-declaring.”

West said driving licence numbers could also be used to help insurers search the Claims and Underwriting Exchange (CUE) database. At the moment, insurers use names and addresses to search the CUE database, but these are not unique so searches can be difficult.

West said: “Once the driving licence number becomes  commonly collected and attached to claims, that will be a much more resilient searching mechanism.”

Pass notes: Driver database

Will all drivers have to be checked from 2014?
Drivers will not be forced to give their driving licence numbers to insurers and brokers, but any drivers refusing will look suspicious. Motor Insurers’ Bureau chief executive Ashton West said underwriters were likely to judge drivers accordingly.

Will this have the desired effect?
West said: “I think very rapidly people will recognise that the only way to get the appropriately priced insurance is to give their driving licence number.”

What caused the row between the ABI and the DVLA?
A source close to the deal said the hold-up was partly due to insurers wanting to get value for money from investing in the project. “It certainly seemed like a lot of money. It was really a question of insurers making sure we were getting as good a deal as we could,” the source said.

We say …

● This is a good move from the ABI, not least because it will help crack down on the 42,000 disqualified drivers suspected of taking out insurance.
● The anti-fraud benefits of opening up the DVLA database are clear, but less obvious benefits include cutting down on the number of questions insurers will need to ask applicants and improving the accuracy of rating.