Sky-high car insurance premiums could be a thing of the past if radical proposals from the government are given the go-ahead.
A stricter driving test, curbs on the size of payouts in personal injury claims and a tougher stance against uninsured drivers, are just some of the measures being put forward.
The plans have been announced in a special report from the government Transport Select Committee, following its investigation into the soaring price of car insurance.
A typical annual comprehensive policy jumped by 40.1 per cent in the year ending 31 March 2011, according to figures from the Confused.com/Towers Watson Car Insurance Price Index.
So what changes can motorists expect, and how will they help keep insurance costs under control?
Personal injury claims
The cost of settling personal injury claims for things like whiplash have significantly pushed premiums up, the select committee found.
So much so, that in recent years the increase in claims among those injured in road-traffic accidents is thought to have added £100 to the cost of insurance for the average driver.
At the moment if you make a claim, win or lose, the legal fees are paid by car insurance companies.
The Department for Transport (DfT) says this system encourages motorists to make spurious claims.
The current system costs insurers £2 billion a year which they offset by raising the cost of car insurance premiums.
The DfT said that the government had decided to stop claimants having their legal fees paid by insurers.
This change will mean motorists have to think harder before making a claim, even on a no-win, no-fee basis, but will ensure that genuine victims will still be able to get compensation.
Further changes to the compensation system
In a separate announcement the Ministry of Justice has revealed plans to ban referral fees, the practice whereby insurers and other parties in the claims and accident process, such as garages and the police, pass customers’ details on to lawyers to generate more claims.
Justice Minister Jonathan Djanogly said: “Honest motorists are seeing their premiums hiked up as insurance companies cover the increasing costs of more and more compensation claims.
“Many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents.”
Tackling uninsured and underinsured drivers
In June this year the law on keeping uninsured vehicles was changed so that it is now illegal to have a car without insurance, even if it is on private land, unless you have a valid Statutory Off-Road Notification (SORN).
To boost this move the DfT has plans to combat insurance fraud by giving insurers access to DVLA data.
This means insurers can check drivers’ records when they apply for insurance, to ensure they are being honest. But this system could take up to 18 months to implement, the report said.
Cutting premiums for young drivers
Drivers under the age of 21 have been hardest hit by increases in premiums. The higher accident rate among this group has seen their average annual cost of cover rise to more than £2,000.
The select committee has asked the Government to set out exactly how it plans to reduce accident rates among young drivers, as well as look into new technology which would help track driver behaviour and reward more careful motorists with lower premiums.
