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Street Legal

imageInsurance giants profiting at expense of ordinary drivers. 

By Tom Jones, Head of Policy at Thompsons Solicitors

Thompsons Solicitors is fighting to get a fair deal for millions of drivers in the UK following evidence that the big four car insurers in the UK are paying out huge dividends to their shareholders rather than reducing premiums to their customers.

The UK car insurance market is dominated by four firms: Direct Line and Admiral – who have paid a massive £478m in dividends to shareholders in the last 12 months – and AVIVA and AXA who do not even reveal the profit they make from UK motorists, ignoring international reporting standards which require them to do so.

At a time when there is intense debate about how big business providing other necessities such as household gas and electricity are adding to the cost of living, the public has a right to know exactly how much profit car insurers are making from what is a compulsory purchase. It should be a basic requirement that motor insurers operate with full public transparency and accountability.

After years of insurance industry claims that they are in ‘crisis’, the Direct Line and Admiral dividends are outrageous. The cries of crisis look very hollow when you view their accounts. Their dividend pay-outs in 2012 are the equivalent of £63 for each of their 7.6 million policy holders.

Insurers have complained endlessly for years about ‘compensation culture’ – which three government reports have said doesn’t exist beyond a perception – and ‘fraud’ – which judging by the number of prosecutions and the evidence we see is very small scale and easily dealt with by refusing to pay out if ever it is suspected – and most recently ‘whiplash’ – which insurers have been paying out on for years and have suddenly become interested in.

No one welcomes the claims companies, or can possibly support dodgy claims, but there is more than a whiff here of insurers doing very nicely thank you and always looking for something to justify their premiums.

In their accounts and annual reports the insurers admit that the number of claims being made is far below what they forecast – and that means big dividends.

We need to see cheaper car insurance, particularly for people who rely on their cars for their daily lives – like taxi drivers up and down the country. And we need to see a transparent system that gives confidence to the customer that the insurers are being fair in a captive market.

Thompsons has submitted a report on car insurance to the House of Commons Transport Select Committee proposing measures to reform the industry for the benefit of policy holders, including:

  • Setting minimum product and service standards
  • Proper disclosure of financial and trading information
  • Independent information for accident victims on their legal rights

Car insurers can’t be relied upon to pass savings on to motorists in the form of lower premiums. They are very good at collecting in the premiums and clearly know how to pay out large dividends to keep their shareholders happy, but reducing those premiums, even if their profits suggest they could, isn’t something they are prepared to do. Motorists deserve better.

Click here to read Thompsons Solicitors’ submission to the Transport Select Committee.

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