Proposals to introduce road pricing have pushed insurers reluctantly into a hot political debate Katy Dowell reports on the issues
The issue of charging motorists for using the roads has divided the nation. Climate change campaigners have applauded the principle of road pricing saying it would cut urban congestion on Britain's roads by half by 2025.
On the other hand, more than one million motorists have signed a petition against the move arguing it would hit lower income families who already have to pay hefty fuel taxes.
With the government relentlessly driving the policy forward, insurers are asking where they will fit into New Labour's plans for Britain's roads.
Using telematics or 'black box' technology, the government proposes to charge motorists for every mile they spend on the road. This could force motorists to pay up to £1.50 a mile in peak times on busy roads on top of current road tax.
Insurers, such as Norwich Union (NU) and Royal & SunAlliance (R&SA), are already using the technology to more accurately price driving habits and set premiums. Now the insurance industry is considering the implications of the government's road pricing strategy.
One suggestion is that the insurance industry, using its developing telematices technology, could colect motorists' fees for road use.
The ABI is only just beginning to assess the impact. A sub-committee has been established to gather evidence which will feed into a wider consultation being carried out by the Motorists' Forum. The independent government advisory body will publish its findings later in the spring, at which point the ABI hopes to advance its talks.
As an ABI spokesman tentatively put it: "We are looking at what mechanisms the government is proposing to put in place and at the role which insurers can have in telematics terms, because it will affect us. Could insurers become tax collectors? What would the consumer think of that?"
These are questions which are left hanging. There is no doubt that insurers are beginning to draw up contingency plans, but as yet they are unwilling to publicly discuss details.
With more than one million drivers signing a petition against the proposed law it is easy to see why the industry is nervous about how to respond.
A leading insurer says: "We are waiting for the policy to be published before we put out a response, but we are looking very closely at this." He says insurers must concede that road pricing will bring benefits, but first there must be a tremendous volte-face in public attitudes.
Many consumers see the use of telematics as underpinning a gradual move into a 'big brother' state. If the proposals are given the green light a little black box will be installed into cars which will be able to track and store information about motorists' movements.
The ABI itself has not publicly consulted on the possibility of insurers in effect becoming tax collectors, and says it has no idea how consumers will respond. However, given the unpopularity of the concept of road pricing, it seems likely that policyholders would not view the move favourably.
The real question is: will the benefits to the insurance industry outweigh the negatives?
By utilising telematics insurers will be able to build up more accurate driver profiles which will allow underwriters to assess risks and possibly lower premiums. "We will be able to get information about people and measure the amount of time they are spending on the roads," says Dave Swann head of motor development at Fortis.
With NU and R&SA currently the only insurers to make use of the technology, road pricing could potentially blow the market wide open and allow all insurers to get involved at different levels. The ABI is examining how this could work and whether insurers would want to take part.
Improved driver profiling will also have implications for claims settlement. "It could help speed up the claims process," says Swann. "We may be able to transmit real time data which would help claims enormously." Equally, he says, fraudulent claims could be more easily spotted.
The only industry-wide database fighting fraud today belongs to the Insurance Fraud Bureau (IFB). Although advanced, it is stretched in the fight against crime because, among other things, there is a lack of data. Insurers say road pricing will make it easier to target areas known for staged accidents at certain times of the day.
Uninsured drivers will also find it more difficult to take to the road because police will have the technology to record where the vehicle has travelled and who has been driving it.
Swann sums it up: "Road pricing will be good because it will drive down car use and lower risk. It can appeal to younger drivers because it can reduce costs. On the other hand, there is a downside because it can't be tailored if the motorist refuses to change behaviour. Telematics is not good for everyone and could create a two-tier premium system."
The ABI will deliver its findings to the Motorists' Forum in the coming weeks. It will put forward the questions which need to be answered if road pricing is approved. Undoubtedly, it would have benefits for sectors of the motor industry. But whether the public will support that move is another matter. IT