The Competition and Markets Authority (CMA) failed to deliver badly needed reforms to the motor insurance market this week following a two year investigation.
The remedial actions contained in their final report amount to very little in meaningful change.
The CMA missed the chance to tackle the fundamental issues affecting UK motorists and the market – with its millions of pounds of unnecessary costs – rolls forward.
Sadly, the CMA investigation had a flat tyre before it hit the road.
If we look at the major challenges facing the market – whiplash claims, fraud and escalating legal costs, to name a few – the scope of the investigation was inadequate.
This led them to ineffective remedies, some of which they discovered they did not have the authority to implement; inevitably the UK's motorists were left feeling underwhelmed.
I believe the CMA should have been able to review the motor claims process as a whole, a system of spiralling costs which prioritises financial compensation and encourages exaggerated and opportunistic personal injury claims.
Let's call this culture of exaggerated claims what it is. This is fraud. It is not a victimless crime. The cost of motor insurance for law-abiding motorists is driven up as a result.
The Government has shown some appetite for starting to deal with the problems of fraud, whiplash and rogue claims management companies and that's to be commended.
Motor insurance premiums have fallen sharply - down 14 per cent since 2012 – a welcome relief when household budgets have been under so much pressure. But we must stop nibbling at the edges and start taking real bites out of the challenges facing the motor insurance market.
Aviva has put forward wide ranging yet clear and achievable reforms to cut annual premiums by a further £50, equivalent to another 14pc on average for every driver. We want to see a legal system and laws which lead to long-lasting and meaningful reductions in the price of motor insurance.
The CMA failed to address referral fees in car hire and repair claims.
Aviva believes all forms of referral fees should be banned.
These are commonly paid in exchange for details about accidents so that the car hire firm, garage or recovery agent can attract work associated with the claim.
They add a significant level of cost into motor claims, but from a customer's point of view, they add nothing.
Third parties such as some claims management companies see motor claims as an opportunity to profit at the customer's expense. They line the pockets of companies who profit from motor claims, adding around £200 million, or £7 per policy, to the cost of motor insurance, with no tangible benefit to the customer. This is not equitable for consumers and it must change.
Secondly, we need to put the brakes on the UKs compensation culture. Weak regulation of motor claims and poor industry practice has encouraged high claims costs and fraud – much of it from organised crime. The bottom line is increased costs to consumers. Collectively, insurers, personal injury lawyers, claims management companies, the regulator and Government must sort this out.
Last year 94pc of all personal injury motor claims paid by Aviva in the UK were for minor injuries such as short-term whiplash. Compare this to France where whiplash accounts for only 3% of motor injury claims in France.
The UK does not have the weakest necks in Europe. But it does have weak laws and regulations governing personal injury claims and rogue claims management companies.
Aviva recommends reforming the current system which pays cash compensation for minor whiplash injuries, to one that purely focuses on treating victims' injuries and helps them return to health. Whiplash is a genuine injury which can cause significant pain and discomfort. So we want to put care, not cash, at the heart of the injury claims process.
Treating short term minor whiplash injuries with rehabilitation and care instead of cash would remove £900m from claims costs, saving motorists around £32 on the average annual premium.
Finally, if we are serious about tackling this issue, we must look at the legal system which allows exaggerated claims to flourish.
For every £1 Aviva pays out in personal injury compensation in the UK, another 77p in legal fees goes to lawyers. Many claims are straight-forward cases for minor injuries where lawyers are not necessary - restricting them to cases where their expertise is needed could save £300m, or £11 per policy.
Aviva will continue to make the case for change. We are building cross industry consensus. Customers, brokers and insurers want to see the cost of motor insurance reduced.
The CMA had an opportunity to fix the system and it didn't. The responsibility now passes to insurers and the Government.
We cannot afford to waste more time talking about the problems instead of tackling them. Now is the time to overhaul the system to put motorists' interests first.
