Who really is Cashing in on your Crash?
Having watched Dispatches: Secrets of Your Car Insurance on Channel 4 last night, I felt that finally some justice was being done to highlight that fact that it is Insurance companies that are driving up premiums and purely for their own gain.
According to the AA, over the past four years the average annual premium has increased by 89% to £840, well above the rate of inflation, and yet Insurance companies claim that it is not their fault.
Personal injury solicitors are the first in the firing line when it comes to justifying these higher premiums, with whiplash claims alone being held responsible for an additional £90 to the average driver’s premium.
The insurance industry claims it is the ambulance-chasing lawyers that are to blame, not the insurance companies.
In order to analyse how the system really does work, in last nights program, Dispatches journalist Harry Wallop crashed his car into a parked car, causing nearly £2000 worth of damage.
He then unraveled the process of claiming for the damage through his insurer, exposing a catalogue of somewhat questionable activities…
- “Steering” claimants to “approved” garages on the promise of a better service, guaranteed parts, courtesy car or free valeting whereas the real focus was on maximising profit for the insurer with the insurer threatening to charge the insurance excess should their customer get their car repaired outside the network.
- Compromising on safety in order to cut their own costs: Volvo’s website states “Insurance companies are reducing costs by having non-genuine parts fitted or panels repaired rather than replaced, which may compromise the car’s safety integrity.”
- Increasing the costs of repair for non-fault accidents: If you are involved in a non-fault accident your insurance company passes on the bill to a rival firm. The program noted that the repair costs tended to be higher. The Competition Commission found that the average price of a repair for a non-fault accident is £1,530, compared with £1,375 for an at-fault accident, although many experts believe this discrepancy is much wider.
- Making deals with paint suppliers: The program spoke to a number of garage owners who said they were forced – or “mandated”, in the euphemistic term – to use more expensive paint when mending a non-fault car. Each time they did this the insurer got a “rebate” (or “kickback”) from the paint company.
- And it’s not just paint: it was highlighted that Insurance companies can receive rebates every time a certain brand of sandpaper or computer software is used.
It is thought that this kind of income stream makes insurers an additional £100m per year!
As Harry Wallop noted, the savings that your insurer makes with the rebates and so on are not passed on to you to help reduce your premium. Instead, they are used to swell the insurers’ already large profits.
It strikes me that the real reason that insurance premiums are so high is because of insurers’ greed and not the number of claims that are being made. It is hoped the Competition Commission will uncover more details in its ongoing inquiry.
Robin Torr, Head of Personal Injury Dept. Abacus Solicitors LLP
Information taken from Dispatches: Secrets of Your Car Insurance, Channel 4, Monday 7th January, 8pm