Counting the Real Cost of Insurance

The Government’s proposed changes to the world of Personal Injury claims have been hugely publicised in recent months, but are their concerns justified and where does the cost of your insurance premium really go?  I am not convinced that whiplash claims have much to do with rising insurance premiums and after reading this article you may be a little more enlightened than the press would like you to be.

According to recent news articles whiplash claims add an average of £90 on to every insurance premium.  I must confess I do not know where that statistic has come from and I certainly have not seen the figures it is based upon, but one thing I do know is that every day Solicitors must battle against the maladministration of many of the big insurance companies.  We get paid fixed fees for road traffic accident cases now, so it doesn’t matter how much work we do on a case we will not get paid any more.  Insurers know how much they will have to pay for legal costs and can budget for it.

But what about other heads of loss?  If you are in an accident your car may be recovered by a recovery agent.  That costs around £150 and why should you pay it if the accident was not your fault?  If your car is undriveable it will be stored at the recovery agent’s premises.  They charge somewhere in the region of £20 per day.  You have no car to drive so you are entitled to hire a car on credit, i.e. you do not pay for it but send the bill to the fault driver’s insurer when you give it back.  That costs the insurer anything from £40 to £100 per day, dependent on the vehicle.

I should remind you at this point that all of this is designed to help the person who has lost his car get back on the road.  It is sanctioned by the Government, insurance industry, and the Courts.  All is well and good, until….

…..the insurer becomes involved.  The injured party instructs a Solicitor who submits details of the claim directly to the opponent insurer over an internet portal.  The insurer has to acknowledge receipt within 24 hours and provide a liability decision within three weeks.  If liability is admitted they should pay the Claimant the pre-accident value of his vehicle, which means that he then has a cheque to replace his car, he can give his hire car back, and dispose of the wreckage of his own car which stops the storage charges accruing.  Three weeks storage and hire would amount to an average of around £1,470.  Add in your personal injury damages, recovery, and legal costs and the total outlay is around £4,720.  Vehicle damage would be paid on top but that depends on the value of your car. Not an insignificant amount but it is not going to bankrupt an insurer either.

But what if the insurer admits liability within three weeks but through a total lack of action fails to pay the pre-accident value of your vehicle?  What if your Solicitor rings them and is met with an automated response which says “We are currently experiencing large call volumes and cannot answer your call – please call back later”?  What if your Solicitor’s emails are unanswered, and when they do get to speak to somebody that person can find no record of the accident or having received any documents?  What if after four frustrating months you have still not received your vehicle damages cheque?

The answer?  The insurer still has to pay.  Except now the hire bill is £6,000.  The storage is £2,400.  The personal injury damages, costs, recovery charges, and vehicle damages remain the same regardless.  The case has not changed at all in terms of severity, but now the insurer has an outlay of £11,640 plus vehicle damage.  Almost two and half times what it should be.  That happens every single day, day-in day-out, all year.  Add that cost together and insurers are leaking millions in lost revenue.

Of course, not all insurers are the same and some will handle cases perfectly professionally but stop for a second and have a think to yourself;  will halving Solicitor’s fixed costs actually make any difference to an insurer if that is how a claim is dealt with?  Will reducing the number of whiplash claims make any difference, if the financial part of the claim is worth four times the injury damages?  Not a bit.  So why is the Government concentrating on Solicitors fees and the “excessive” cost of whiplash claims?  You will probably have your own thoughts but as for me, it is an uncomfortable coincidence that all of this comes at a time when the Government is least popular following budget cuts etc.  It is easy to get voters on board by promising to reduce the cost of motoring because that is something most people struggle with every day of their lives.  I say that if you want to do that, halve the tax on petrol and let injured people continue to obtain the redress that the law allows them to.  Then see how many people you see smiling at both the pumps and the polling station.

David Mayor

About David Mayor

David is Head of the Preston Office's Civil Litigation team and deals with all types of private Civil Court disputes. David’s blogs cover his expertise in all aspects of personal injury law from low value Road Traffic Accidents right through to complex large loss claims. David also writes and has a vast array of experience in Public Liability (trips and slips), Employer's Liability (accidents at work), and Motor Claims (motor vehicle accidents, pedestrian accidents).
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