The International Underwriting Association (IUA) has been commissioned by the Parliamentary all-party insurance group to produce a discussion paper on unlimited motor insurance, in light of the rocketing cost of claims for insurers.
Unlimited third party bodily injury cover is currently a compulsory class of insurance for motorists in the UK. But a 2003 study by the IUA and the ABI shows that the cost of motor claims has been rising at a rate of 10% a year.
Reinsurance groups, who usually cover the largest claims, have been hit particularly hard.
Nick Lowe, director of government affairs at the IUA, commented: “If current trends continue, there is a danger that insurers may become increasingly reluctant to offer motor injury cover and this could have a significant impact on premiums.”
FSA stipulations on more tightly regulated capital reserves for insurers has also been put forward as a major area of concern by the IUA.
Lowe said: “In a number of other EU countries motor third party liability cover is not required to be unlimited. It remains to be seen what the best solution will be for the UK. The IUA's aim is to make sure any considerations undertaken by the government are made from a position of knowledge and understanding.”
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