We bring the latest from the Transport Select Committee motor inquiry

AA president Edmund King has accused insurers of dragging their heels over offering discounts to young motorists who go on safer driving courses.

Presenting evidence to the House of Commons’ Transport Select Committee inquiry into the cost of motor insurance, King said the AA had been in talks with insurers about offering a 15% discount to young drivers who had taken the Drive iQ Pro BTEC that it has sponsored.

But he said persuading insurance companies to offer a discount was hard, even though it would enable drivers to recoup the costs of taking such a course within a single year.

ABI director of general insurance and health Nick Starling, who also gave evidence, said that no claims discounts were a better incentive for encouraging safer driving.

Hit to rural areas

Committee member Kwasi Karteng, MP for Spelthorne (Con), wondered how the insurance market would respond to the mounting cost of bodily injury road claims.

“Some insurance companies may exit. The real question is whether increases are acceptable for policyholders or the government,” he said.

Brown said that premiums were likely to continue to go up in line with claims costs, which he expected to increase by 15%-20% next year.

King told the committee that the likely impact of escalating insurance costs would be a combination of more people driving without insurance and an increase in those on motorbikes and scooters. The impact of rate rises would be particularly acute in rural areas where people were more reliant on having private cars to get to work, he warned.

Insurers 'pocketing referral fees'

Overall, the industry representatives who appeared before the committee overwhelmingly backed the full implementation of the Jackson Review of civil litigation costs.

Motor Accident Solicitors Society chairman John Spencer disputed the industry consensus, arguing that while legal costs had risen, they had not increased as fast as the number of claims.

“We need to put it into context and insurance companies have a part to play,” he said, accusing the insurance industry of being responsible for pocketing the “vast majority” of referral fees.

Starling acknowledged that insurers were not blameless, noting that “we are working in a dysfunctional system”.

Ways round a ban

But Spencer warned that claims management companies would simply sidestep any ban on referral fees by exploiting soon to be introduced legislation to liberalise the ownership of legal practices.

“If referral fees are simply banned, you will simply have claims management companies moving into the market to own and control solicitors’ practices. You can see that there are huge unintended consequences of going down this road.”

He also said that Jackson’s proposals to end the recovery of success fees from defendants would directly hit severely injured accident victims in the pocket.

“It can’t be right to rectify the problem by taking money off accident victims and give it to an insurer, which would be the net effect of ending recoverability,” he said.


Motor Insurers Bureau chief executive Ashton West said that the committee should take note of the different way whiplash, which accounts for 70% of bodily injury claims in the UK, were treated across the rest of Europe. In Germany, for example, he said there was no compensation for whiplash, which is a soft tissue injury.

“The problem is virtually unknown in some European countries; it’s clearly more than a medical phenomenon. Behavioural changes in society are driving this,” he said.

“If society wants to pay for every tiny ache and pain, there will be a price to pay.”

The Select Committee

Select committees are made up of backbench MPs and their role is to scrutinise the work of government departments.

They do not introduce legislation, but the government is forced to respond to any recommendation that the committees make.