Insurers told to combat fraud and reduce premiums

Car and van insurers have been told by MPs that they need to do far more to combat the rising levels of ‘cash for crash’ fraud, as well as make their referral fees far more transparent in order to combat the costs of premiums.

Fraud is one of the leading causes of the high cost of van and car insurance premiums. Prices have shot up in the past year. According to The AA, the last year alone has seen average increases of more than 30%. For some however, the increases have been significantly greater. The recent ban on gender specific insurance quotes has impacted on young women drivers, who have had to stand by and watch as their insurance premiums rose by up to 70%.

A dramatic increase in the instances of claims for bodily injury as the result of fraud and the efforts of no-win, no-fee lawyers have affected insurers severely, with average underwriting losses of 23p for every pound of premium received.

Louise Ellman, the Labour MP who chairs the committee, said: “While legal deregulation has bought improvements in access to justice, this has come at the cost of an increase in the number of injury claims which have been made.”

She also highlighted the merry-go-round of referral payments which are made by or to insurance companies and law firms as well as a wide range of other businesses involved in responding and managing car accidents and claims.

Ms Ellman continued: “Consumers are largely unaware of just how much money moves around the insurance industry in this way when making a claim. If insurance companies cannot agree to a plan to improve the degree of transparency around referral fees then the government should certainly step in.”

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