It can’t go on like this!

An interim report into affordable car insurance

David Ward MP

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Contents

1. Executive Summary ........................................................................................... 4

2. Introduction ........................................................................................................ 5

3. The Motor Insurance Industry .......................................................................... 6

3.1 Market factors ................................................................................................. 8

a) Credit hire companies .............................................................................................. 8

b) European Court of Justice ruling ............................................................................ 8

c) The cost of personal injury claims ......................................................................... 9

d) ‘No win, no fee’, referral fees and claims management companies ............... 10

3.2 Crime .......................................................................................................... 13

a) Insurance fraud ....................................................................................................... 13

b) Uninsured drivers ................................................................................................... 13

c) Measures to combat uninsured driving ............................................................... 14

3.3 Young and newly qualified drivers .............................................................. 16

4. The scale of the problem in Bradford ............................................................ 17

4.1 Expert witnesses ....................................................................................... 17

a) The Police ................................................................................................................ 17

b) The Insurance Industry .......................................................................................... 18

c) Doctors ..................................................................................................................... 23

d) Driving Instructors ................................................................................................... 23

4.2 Results of residents’ survey .................................................................... 24

a) The survey ............................................................................................................... 24

b) Car usage in Bradford ............................................................................................ 24

c) Car insurance premiums in Bradford ................................................................... 25

d) Causes of high premiums ..................................................................................... 26

e) Suggested remedial action ................................................................................... 27

f) Impact on Drivers ................................................................................................... 28

g) Summary .................................................................................................................. 29

4.3 Local case studies .................................................................................... 29

a) Thematic analysis ................................................................................................... 29

b) Case study quotes .................................................................................................. 30

5. Summary and next steps ................................................................................ 32

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1. Executive Summary

1. Average car insurance premiums in Bradford are among the highest in the

country and increases have been consistently higher than in other parts of the UK. This is a problem faced by people of all ages and backgrounds, living in all parts of the city although it does clearly affect some post codes more severely than others.

2. Responses to our survey clearly show that these huge increases are having an

unacceptable impact on Bradford residents and businesses and that urgent action must be taken to bring costs down.

3. The causes of recent increases are broadly similar to those in other parts of the

UK, with the increasing cost of personal injury claims playing a leading role, and fraud, uninsured driving and credit hire costs also making significant contributions.

4. Our research indicates that the exceptionally high cost of car insurance in

Bradford relative to other areas is caused by several local factors, in particular:

High levels of car insurance fraud. Bradford has one of the highest levels of ‘cash for crash’ type insurance fraud in the country

High incidence of uninsured drivers. Some areas of Bradford have some of the highest level of uninsured drivers of any area in the UK.

Exceptionally high levels of personal injury claims driven by a very high number of claims management companies.

5. A number of specific suggestions for tackling rising car insurance costs have

arisen from our research which we believe merit serious consideration by the Government. These include:

Proceeding with measures to bring down the cost of ‘no win no fee’ cases

Regulating the credit hire industry to tackle excessive costs

Banning the payment of referral fees

Setting up a self-funded specialist police unit to target uninsured drivers

Introducing stiffer penalties for failing to purchase insurance

Introducing windscreen insurance disks

Adjusting the evidence requirements for making a whiplash claim

Supporting the rising use of driver information systems for younger motorists but on a strictly voluntary basis with tighter controls on how data can be collected and used

Strongly resisting the European Court of Justice’s ruling that gender cannot be taken into account in insurance underwriting

Proceeding with the proposal to expand the scope of online portal for personal injury claims

6. We will be carrying out further research into these proposals and seeking high level Ministerial meetings to discuss our findings.

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2. Introduction While the issue of rising car insurance premiums is acknowledged to be matter of concern across the country, this report and supporting survey work was prompted by the level of complaints received by the office of David Ward, MP for Bradford East. It was quickly identified as an issue of major significance to people across the whole Constituency and the view was quickly taken by the Constituency Campaign Team that “it can’t go on like this”. Dramatic rises in the cost of car insurance have received a great deal of media attention over the past 12 months, and have been the subject of a recent inquiry by a Parliamentary Select Committee. The Government have already responded with some new measures aimed to bring down the cost of insurance, but it remains to be seen whether these will be radical enough to have an impact on a situation which is clearly unsustainable. The report examines how recent increases in premiums have affected people’s lives across all parts of Bradford. It will also look at what factors are to blame for the particularly high level of car insurance premiums in the city and consider what future steps might be taken to bring premiums down. In order to gather evidence we have conducted interviews with key individuals, and invited expert groups to make written submissions. This has been accompanied by an extensive survey of Bradford residents.

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3. The Motor Insurance Industry Car insurance to cover third party damage and injury is compulsory throughout Europe under European motor insurance legislation. However, comprehensive cover represents the largest proportion of the market, and our report deals primarily with this. The past decade has seen big rises in car insurance premiums across the whole of the UK. The AA British Insurance Premium Index shows that the lowest three quotes from 90 providers (“Shoparound” average) has almost doubled since 2007 (Figure 1), and that this rising trend has accelerated over recent years. In the year to April 2010 the Index shows a rise of 40.1%, to an average annual premium of £892.

Figure 1 (Source: AA British Insurance Premium index1)

The Index also shows that 17-22 year olds have seen the biggest percentage rises although their premiums did fall slightly in the first quarter of 2011, to around £2,493. Clearly, this level of premium puts car insurance beyond the reach of many young people. In Bradford the picture is even worse both in terms of the level of cost of insurance and the rate at which premiums have increased. According to the consultants Towers Watson, Bradford has had the highest rate of increase in comprehensive car insurance premiums since they started their Insurance Price Index in 1997, with premiums currently increasing at a rate of 13% every three months. Underlying these huge increases are two years of heavy losses for the car insurance industry. FSA returns show that in 2010 motor insurers lost 20p on each £1 of

1 http://www.theaa.com/services/insuranceandfinance/insuranceindex/index.html

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premium sold, and suffered similar losses in 20092. This suggests that unless something is done to deal with the causes of the escalating costs faced by insurance companies, then further increases in premiums are likely as the industry seeks to return to profit.

The industry reports that the recession has reduced investment returns insurance companies can expect to receive on any premiums earned3. The emergence of price comparison sites has made the industry intensely competitive and reduced the margins that insurers make on their products. Increased European capital adequacy requirements, which mean that insurance companies cannot invest as much as they were able to in the past may also have played a role more recently. However, insurers have been clear that it is the rising cost of personal injury claims which has played the biggest role in pushing up the premiums that they need to charge. Other factors have also played a role, in particular credit hire costs, insurance fraud, and the cost of accidents involving uninsured drivers. While the combination of factors pushing up insurance costs in Bradford is broadly similar to other parts of the UK, this report finds that some of these are unusually acute in the city. The result is premiums which are exceptionally high. In an area where average incomes are relatively low, this means that car insurance is, for an increasing number of Bradford residents, unaffordable. In this section we review the available evidence on the factors responsible for driving up the cost of car insurance for Bradford motorists, and for young motorists in particular. We also examine some of the action which is already being taken to remedy this situation.

2 ABI market analysis 2010

3 BIBA evidence to The Cost of Motor Insurance, Transport Select Committee HC 2010-11 Ev69 para

2.5

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3.1 Market factors a) Credit hire companies Credit hire firms are a rapidly growing component of the insurance claims industry4. These companies offer their clients replacement cars on credit, while their own vehicles are being repaired following an accident. The cost can then be claimed from the at-fault insurer. Because the customer who hires the replacement car is not the one ultimately paying the bill, the cost is often significantly inflated. Lloyds Market Association research5 found that credit hires are usually five days longer than insurer arranged hires, and on average the cost is 2.4 times higher. The at-fault insurer is not involved in the rental agreement and so has no way of controlling the cost to ensure that the length of the hire and the type of vehicle are reasonable. Claims and accident management companies will usually make a percentage on arranging credit hire vehicles, incentivising them to maximise the value of the hire agreement. Frequently accident management services are offered by credit hire companies themselves. Often, the same businesses that organise and profit from credit hire will also organise the repair of the damaged vehicle. This gives them a perverse incentive to delay the repair for as long as possible in order to maximise income from credit hire agreements. We were contacted by Ford who are attempting to bring costs down by introducing their own accident management model. Ford have recently introduced an accident management service for their customers which offers replacement vehicles at cost price, plus a fixed admin fee, so there is no incentive to prolong the hire period for longer than necessary. There is currently no specific regulatory regime for accident management companies or credit hire companies although costs have been bought down through the “General Terms of Agreement” (GTA) protocol, jointly agreed with insurance companies (see section 3.1 b). b) European Court of Justice ruling In March 2011, the European Court of Justice ruled that the use of gender in insurance underwriting constituted discrimination. This ruling will come into effect in December 2011.

Average premiums for men are higher than those for women, but the gap is greatest for younger women drivers who pay around half as much. According to the latest AA British Insurance Price Index the “Shoparound” average for those aged 17 to 22 is now £2,872, while the average for women in the same age group is just £1,6716. The consequence of the ruling will be that premiums for women drivers are likely to increase: the ABI predicted that premiums for women drivers under 25 could

4 Lloyds Market Association member suggests that the number of cases involving a credit hire

company increased by 69% in the 18 months to September 2010, cited in “The Cost of Motor Insurance, Transport Select Committee HC 2010-11 Ev47 paragraph 2.8 5 Ibid

6 http://www.theaa.com/services/insuranceandfinance/insuranceindex/

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increase by as much as 25%7. Data from the AA Insurance Index8 suggests that insurers are already increasing their prices for women in anticipation of the ruling coming into effect. c) The cost of personal injury claims Insurance industry groups and a recent report by Parliament’s Transport Select Committee have identified the rising cost of personal injury claims as the leading factor in driving up insurance premiums. A major industry working party on the issue has found that the cost of injury claims from road traffic accidents is increasing at around 30% each year. They found that around a third of this increase can be attributed to the higher number of claims and the remainder to the higher average cost of settling claims. Despite the fall in the number of road traffic accidents, the number of personal injury claims has risen by over 70% over the last ten years, and the proportion of accidents involving third party injury claims is now approaching 25%9. In Bradford the figure is close to 38%, giving the city among the highest level of personal injury claims in the UK10. Moreover, research by the Institute and Faculty of Actuaries shows that the number of claims in Yorkshire has been increasing at a faster rate than other areas in recent years11. A large proportion of the increase in the number of claims has been made up by whiplash injuries. ABI research has found that around two thirds of motor insurance personal injury claims arise from whiplash injuries12 - twice the European average - and 20% of every motor insurance premium is paid out against whiplash claims13. The main evidence required in order to make a claim is a doctor’s note, and our discussions with GPs revealed that there is no physiological test for whiplash injuries, meaning that doctors may find it difficult to refute phony cases. So far, the Government has refused to consider increasing the evidential requirements for whiplash on the basis that it may mean that genuine claims go uncompensated14. The evidence collected for our enquiry suggests that people are being incentivised to make personal injury claims by aggressive marketing practices pursued by personal injury lawyers, and the low risk of pursuing a case under ‘no win, no fee’ arrangements.

7 ABI research cited in ABI press release

http://www.abi.org.uk/Media/Releases/2011/03/European_Court_of_Justice_gender_ban_is_disappointing_news_for_UK_insurance_customers_says_the_ABI_1.aspx 8 http://www.theaa.com/services/insuranceandfinance/insuranceindex/index.html

9 Ratio of third party injury claims to third party damage claims cited in David Brown, Report from the

Third Party Motor Working Party into motor insurance claims costs June 2011 http://www.actuaries.org.uk/sites/all/files/documents/pdf/third-party-working-group-june-2011.pdf 10

Email from Karl Murphy, Institute and Faculty of Actuaries 11

Presentation by David Brown and Karl Murphy Institute and Faculty of Actuaries, http://www.actuaries.org.uk/sites/all/files/documents/pdf/workshop-c4-david-brown-karl-murphy.pdf 12

Tackling Whiplash, Prevention, Care Compensation, ABI 2008 http://www.abi.org.uk/Publications/Tackling_Whiplash_Prevention_Care_Compensation1.aspx 13

Ibid 14

House of Commons Debate, 12 July 2011, c251W

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d) ‘No win, no fee’, referral fees and claims management companies Evidence gathered for our enquiry suggests that ‘no win, no fee’ legal arrangements have played a significant part in encouraging people to make personal injury claims. As a whole the system has also driven up legal costs and dramatically increased the cost of claims paid out by insurance companies, which has been passed on to motorists through higher premiums. ‘No win, no fee’, or ‘Conditional Fee Arrangements’ (CFAs), were introduced through the Access to Justice Act 1999 to replace legal aid for personal injury cases and to maintain access to justice. CFAs allow the winning party to recover their legal fees from the losing party (before this point they were recovered from the clients’ damages). As an incentive for solicitors to take on cases on this basis, the winning solicitor is able to charge a success fee on top of normal fees (up to 100% for injuries resulting from car accidents) which is also recovered from the losing party. This system makes less risky cases highly lucrative for personal injury lawyers, and has greatly added to costs for the losing party. The ABI have estimated that around 10% of motor insurance premiums now pay for the legal costs, and the average cost associated with a claim (£2,100) is almost as great as the average amount paid to the claimant (£2,300)15. This huge cost has meant that insurance companies will now prefer to settle without going to court, even if their chances of success are good, because the risk of losing is so high16. In addition, it has led to the adoption of very aggressive marketing practices by personal injury lawyers, most notably the payment of ‘referral fees’ in return for business. Since 2004, insurers, credit hire firms, vehicle repairers, rescue truck drivers, claims and accident management companies, law firms, and medical experts17 have been able to receive and be paid fees that average between £200 and £1000 per referral18. The fees provide a strong incentive for the organisations receiving them to pursue potential claimants and to encourage them to make claims. The referral fees system has led to the rapid growth of the claims management industry, which markets advice to people wishing to make a claim and then refers them on to solicitors in return for payments. A geographical analysis of the density of claims management companies carried out by Karl Murphy at the Institute and Faculty of Actuaries suggests a link between high premiums in Bradford and the very high number of claims management companies operating in the West Yorkshire region. Figure 3 below shows that the Leeds/Sheffield area is second only to Manchester/ Merseyside for the number of claims management companies per head of population, with almost ten times more than the South West, and eight times more than Wales and the South. Figure 4 and Figure 5 depict the geographical spread of claims management companies and of recent rises in insurance premiums,

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ABI Research, cited in The Cost of Motor Insurance, Transport Select Committee HC 2010-11 591 Ev51 paragraph 3.7 16

Review of Civil Litigation Costs Final Report, December 2009 http://www.judiciary.gov.uk/Resources/JCO/Documents/Reports/jackson-final-report-140110.pdf 17

LSCP p15 18

Ibid, para. 1.3

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respectively. Comparing these maps shows a clear geographic correlation between the number of claims management companies and rising premiums. However, it is uncertain whether the number of claims management companies is a cause of effect of high levels of personal injury claims. According to the Ministry of Justice the Bradford District has 85 claims management companies which they said was “high”.

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premium (source: Institute and

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Figure 3 Claims management company density by postcode (source: Institute and

Faculty of Actuaries)

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There have been a number of attempts to reduce the cost of personal injury claims over recent years. Companies which accept referral fees, including claims management companies, have been regulated by the Ministry of Justice since 2007, forcing them to sign up to a code of conduct which prevents cold calling limits their use of high pressure sales tactics. However a number of companies continue to employ very aggressive marketing practices in order to solicit claims, including unsolicited emails and text messages and leafleting in city centres. There have been calls for further regulation, notably from a Government review on compensation culture, led by Lord Young19. In an effort to reduce legal costs, an online portal (the RTA PI Scheme) was introduced in 2010 for processing road traffic accident claims valued between £1,000 and £10,000. There have been a number of calls for this to be extended to higher value claims and the Ministry of Justice has recently consulted on increasing the threshold to either £25,000 or £50,000 which would cover 90 or 95% of claims respectively20. The Government commissioned a review into legal costs led by Lord Justice Jackson21 which recommended that success fees should no longer be recoverable, and instead should come out of the client’s damages. This will be implemented through the Government’s Legal Aid, Sentencing and Punishment of Offenders Bill, currently at Committee Stage in the House of Commons. The insurance industry22 and Lord Jackson’s Report have also called for a ban on referral fees. The Government have said they are “sympathetic” to this idea23 but have yet to bring forward measures to do it and the proposal was not included in the Legal Aid, Sentencing and Punishment of Offenders Bill. Some organisations have taken unilateral action to refuse referral fees, including the insurer AXA and Ford Accident Management. However, under the current system this puts them at a competitive disadvantage to rival companies who continue to accept fees.

19

Common Sense Common Safety: A report by Lord Young of Graffham to the Prime Minister

following a Whitehall‑wide review of the operation of health and safety laws and the growth of the

compensation culture, HM Government October 2010 20

Ministry of Justice “Solving disputes in the country courts” 29 March 2011 21

Review of Civil Litigation Costs Final Report, December 2009 22

ABI press release, April 2011 23

House of Lords Debate, 7 July 2011, c349

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3.2 Crime a) Insurance fraud Research by the consultancy Towers Watson suggests that insurance fraud costs insurers £1.9 billion per year, adding £44 to the cost of the average premium24 and making fraud one of the main factors in pushing up premiums. The ABI report says that insurance fraud is on the rise, increasing by 30% since 2007. Insurance fraud is dominated by claims for personal injuries and ranges from opportunistic claims for factitious or exaggerated injuries to the most serious ‘cash for crash’ scams, involving staged accidents and often organised by criminal gangs. Clearly, the lack of verifiable physiological evidence for ‘whiplash’ injuries (see above) makes this an easy route for fraudulent insurance claims of all types. Bradford is one of the worst areas of the country for organised insurance fraud. The Insurance Fraud Bureau (IFB) has estimated that there were 30,000 staged collision (‘cash for crash’) claims in 2009 and rank Bradford as having the 5th highest level of ‘cash for crash’ insurance fraud in the country25. Interviews with Bradford Police suggested that it is difficult for them to detect instances of insurance fraud. Because insurance fraud has not been a priority for the police the Government have agreed to set up a specialist police unit, funded by the insurance industry, to help crack down on this kind of crime26. This will be similar to the Dedicated Cheque and Plastic Card Unit (DCPCU) which is funded by the UK payments industry. The unit will receive £9 million from ABI members to fund 35 specialist fraud detectives and police support staff for the next three years. On May 10 2011 the Transport Minister, Mike Penning, announced that a scheme would be developed to allow motorists to voluntarily allow insurers to check their details on the DVLA in order to reduce deliberate and accidental insurance fraud27. This would allow the insurer to check the accuracy of information provided about their age, points on their licence and whether or not they are the main driver of the vehicle, at the time when the insurance is being purchased28. The Department said that the implementation of the project would take 18-24 months from May 2011. b) Uninsured drivers Driving without valid insurance is illegal in the UK under section 143(1) of the Road Traffic Act. However the Government have estimated that around 4% of vehicles on the road are being driven without insurance; the highest level in Europe29. This is a problem which is particularly acute in Bradford: this year the MIB have identified the BD3 postcode as the area with the highest number of uninsured drivers in the UK for

24

http://www.towerswatson.com/assets/pdf/2940/TW-EU-2010-118031.pdf 25

http://www.insurancefraudbureau.org/files/press_release_pdfs/ifb_postcode_crash_for_cash_hot_spots_release__trade_final__05.11.10_pdf.pdf 26

Home Office press release http://www.homeoffice.gov.uk/agencies-public-bodies/nfa/news/fraud-news/police-and-insurance-join-forces/ 27

The Cost of Motor Insurance, Transport Select Committee HC 2010-11 Q264 28

Ibid 29

CIE Evidence Base, DfT, paragraph 9

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the 13th consecutive year, with nearly seven times more uninsured drivers than the national average30. Uninsured driving poses a huge cost to the insurance industry because companies are liable for damage caused by uninsured drivers, and also lose income as a result of premiums which are not collected. This cost is passed on to law-abiding motorists through higher premiums. This is compounded by the fact that uninsured drivers are reportedly five times more likely to be involved in a crash. The MIB have estimated that the combined cost to insurers of uninsured driving is over £500 million per annum, which equates to about £30 per premium. A comprehensive insurance policy covers motorists for damage caused to their vehicle by uninsured drivers and the Road Traffic Act also places obligations on insurance companies to pay compensation in certain other instances where the driver is uninsured31. Under the Uninsured and Untraced Drivers’ Agreement between Motor Insurers’ Bureau and the Department for Transport, the industry also pays compensation for injuries caused by uninsured drivers. The Agreement obliges them to “satisfy a judgement” in the event that the at-fault party is unable to pay, but in practice, legal costs mean that it is cheaper for the MIB to pay out compensation before claims go to court. In 2009 the MIB paid compensation to 30,000 claimants where the third party to a collision event proved to be uninsured. This is funded through a levy on insurers which has increased from £39.2 million in 1992 to almost £400 million in 2010. c) Measures to combat uninsured driving The current penalty for driving uninsured is a fine of up to £5000, 6 to 8 penalty points and a period of disqualification. Current sentencing guidelines state that an appropriate penalty would be a band C fine, equivalent to 150% of weekly disposable income, 6 penalty points and a 12 month disqualification32. In Bradford a sample of cases suggested that average fines are currently around £370; far below the UK average insurance premium of £892. There is no requirement for drivers convicted to pay backdated insurance costs for the time that they were uninsured. The Police also have the option of applying a fixed penalty of £200 and 6 points on a driving licence. Additionally uninsured vehicles can be seized, until a valid insurance certificate is produced, along with a £150 charge. The Transport Minister, Mike Penning, has said that the Government “recognise there is a strong case for better correspondence between penalties and the cost of purchasing insurance” 33. However the Government have said that they have no current plans to increase the level of fines or fixed penalties for driving whilst

30

http://www.mib.org.uk/NR/rdonlyres/E675DE3F-C26F-415B-8B4F-1C85D47D8C42/0/Hotspots_national_release_2010_FINAL.pdf 31

For example where a car is insured, but being driven by a driver who is not named on the policy, the insurance company would be liable for any damage caused by that driver. 32

Magistrates Court Sentencing Guidelines, Sentencing Guidelines Council, May 2008 33

HC Deb, 30 June 2011, c933W

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uninsured, although under the Strategic Framework for Road Safety34 published in May 2011 they have said that would look at increasing the level of fixed penalties for motoring offences more generally. In early 2011, the Government introduced a new offence of being the registered keeper of a vehicle without insurance (unless it is registered as ‘off-road’). In order to enforce this, the Government have developed the Continuous Insurance Enforcement scheme. Under the scheme:

The DVLA’s list of registered keepers of vehicles will be compared with the Motor Insurance Database run by the MIB.

The uninsured vehicle keeper will be sent a warning letter

Vehicle-keepers will be fined £100 if they fail to insure the vehicle

If the vehicle remains uninsured then it can be seized and destroyed. The Department for Transport estimate that this should eliminate 15-20%35 of uninsured drivers. This builds on Automatic Number Plate Recognition (APNR) technology, which has been permitted since 2006. This allows police to check the number plates of vehicles being driven against the MIB’s database in order to detect uninsured drivers. This is in use in the ‘ring of steel’ in Bradford, made up of 80 cameras across the district.

34

Strategic Framework for Road Safety, Department for Transport , May 2011 35

House of Commons Debate, 11 May 2011, Column 448WH

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3.3 Young and newly qualified drivers As noted above, young drivers face dramatically higher premiums than older drivers and recent increases have disproportionately affected them. The high cost of insurance faced by younger drivers is largely a consequence of the high risk that they pose. The AA estimates that a driver under 21 is ten times more likely to have an accident than a driver over 3536. It is indicative of this risk that a large number of insurers seem to be withdrawing from this market altogether. A recent study by Which? found that only seven of thirty insurers they contacted would quote for an 18 year old male driving a 1.4 litre saloon. Solutions to this problem have involved both trying to improve the standard of driving among young drivers, and improving the information that is available to insurers about individual’s driving habits and ability. In the first category the New Drivers Act of 1995 introduced a batch of measures including the revocation of licences for new drivers who accumulate six penalty points and the introduction of the theory test in 1996. The ABI have published detailed research on reducing the risks for young drivers which made a number of further suggestions37, including a minimum of one year learning period and limiting the number of passengers that a young person is able to carry. However, the Department for Transport have said that they are against more regulation for young drivers, which they say would pose a “risk of perverse consequences – for example, limiting the carriage of young passengers would prevent a sober driver providing transport for companions who have been consuming alcohol.”38 A voluntary measure developed in 1995 with the intention of improving matters for newly qualified drivers was ‘Pass Plus’. This scheme consists of six modules, which are assessed on a continual basis without a test at the end. Driving Instructors we interviewed said that Pass Plus was not an effective measure for reducing accidents and an Insurance Broker confirmed that no significant discounts are available for young people in Bradford completing a Pass Plus course. Research from the Driving Standards Agency39 confirms that Pass Plus has been an ineffective predictor of accident risk. Insurers are developing new products which offer discounts if young drivers choose enhanced training before and/or after the test, or are happy to accept in return restrictions such as not driving at night. There is also increasing use of voluntary driver information systems which can provide information on an individual’s behaviour and casualty risks, although these do pose questions about the civil liberties of the individual whose data is being collected.

36

Young Drivers: Road Safety and The Cost of Motoring, ABI http://www.larsoa.org.uk/larsoa_archive/pdfs/Young_drivers_report.pdf 37

Ibid 38

The Cost of Motor Insurance, Transport Select Committee HC 2010-11 Ev74 39

Research, The Driving Standards Agency

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4. The scale of the problem in Bradford

Section three looks specifically at the impact and causes of rising car insurance premiums in Bradford through a series of face-to-face and telephone interviews with experts in this field. In some cases respondents preferred to send us written submissions. It also includes the results of a residents’ survey providing an insight into the experiences and views of local residents, along with a thematic analysis of casework received on this issue. 4.1 Expert witnesses a) The Police We interviewed Inspector Dorian James about the dedicated Road Policing Unit, for which he has overall responsibility. The unit includes 32 officers plus 2 sergeants. The service provided is very expensive, not only because of the direct staffing costs but because of the training required and the cost of the technology needed to carry out their duties. Driving whilst uninsured is one of many road offences for which the Unit is currently responsible, along with speeding, car theft, non-use of seat belts and use of mobile phones whilst driving. The Unit is also used for wider policing duties when additional operational support is required. Ins. James raised the low cost of fines relative to the cost of insuring a vehicle and suggested that this meant that fines were an insufficient deterrent. Later written evidence from the Police suggests that a typical fine in Bradford was only around £370, far below the cost of insurance premiums. We were told that the Police make frequent use of powers to impose £200 fixed penalties and to seize vehicles, charging a recovery fee of £150 to return the vehicle once insurance has been obtained. Written evidence from the Police states that 1,169 vehicles were seized in the first six months of this year; equivalent to around 6 each day. However Ins. James said that the Police time involved in this action is significant as the law requires interviewing of the owner of a vehicle before that vehicle can be seized. Ins. James told us that this area of work was not highlighted as a priority and the police receive no specific funding to carry it out. Ins. James explained the process by which the well-known ‘Ring of Steel’ can be used to identify uninsured vehicles using Automatic Number Plate Recognition (ANPR) technology. In 2009 this was extended from 22 cameras in the city centre to over 80 cameras throughout the District. Ins. James told us about a successful operation carried out in December 2009 in which nearly 1,500 vehicles were stopped and 101 were seized. However Ins. James again highlighted the extensive resources which were required for such an operation. Ins. James’ written evidence proposes a range of stiffer penalties that could be introduced for uninsured drivers. These include increasing the level of fixed-penalty notices and forcing uninsured motorists to pay back-dated insurance costs. He also

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proposes that fines could be returned to the Police to fund a self-sustaining specialist unit to target uninsured driving, though acknowledged that there would be opposition to this. On the subject of accidents involving personal injury it was confirmed by Ins. James that it was not an offence to fail to report the accident to the police. His written evidence suggests that even when injuries are not detected by a motorist until after an accident, the accident should still be reported to the Police . A general discussion on the subject of personal injury claim fraud revealed the difficulty in the police being able to detect the crime and in fact Ins. James could only recall one example of a successful conviction.

b) The Insurance Industry The Association of British Insurers We interviewed the ABI’s Policy Advisor, Rob Cummings, and the ABI also sent us their submission to the recent Transport Select Committee inquiry on the cost of motor insurance.

The ABI said that they were aware of the high cost of insurance in Bradford. Their view is that the factors which are causing insurers to put up their premiums in Bradford are similar to factors working on a national level. They ranked the top three factors as being the compensation system (and the cost of personal injury claims specifically), insurance fraud, and uninsured drivers. On a more local level they said that the level of vehicle crime in an area could also play a role but that generally advances in vehicle security had bought this down. On the subject of the compensation system they said that the legal costs of processing personal injury claims had risen significantly to the extent that legal costs are as much as 87p for each £1 paid out in claims. They said that this was due to high fixed costs charged by personal injury lawyers which were significantly greater than the equivalent fees paid in other countries. They said that the recently developed RTA PI scheme had been successful in reducing costs, bringing down the average legal cost from around £2000 to around £1,200. However, they emphasised that this was significantly higher than other EU countries, giving the example of Germany where legal costs are around £200-£300. They also expressed concern that the portal may have made it more attractive to make claims by simplifying the process. ABI said that they regretted that a ban on referral fees had not been included in the Legal Aid, Sentencing and Punishment of Offenders Bill, although they acknowledged that this would be difficult to implement a ban effectively, and that an amendment adding a ban to the Bill would need to be carefully drafted. They also said that referral fees were a symptom rather than a cause of the problem, in that the high legal fees charged by personal injury lawyers made it profitable for them to pay substantial amounts for new business, and that what was ultimately needed were further measures to control fixed costs. They gave the example of Ireland where recent reforms have significantly reduced costs. We agreed to meet with them in the autumn to discuss issues relating to the Bill further.

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They highlighted the strong correlation between claims management companies and the number of personal injury claims which we mention above. They said that credit hire was a significant issue, but that costs were starting to be controlled in the last 12-18 months through market solutions particularly through Insurance Companies’ General Terms of Agreement protocol with credit hire companies which defines the level of cost that an insurer will pay for the hire of a car. The ABI acknowledged that information sharing between insurance companies was a relevant issue and said that they were trying to address this using the Claims Underwriting Exchange (CUE) system which allows information about individual drivers’ claims history to be shared among insurers, and through the forthcoming system to allow them to search the DVLA database mentioned above. On the issue of younger drivers they explained that the higher premiums they face are purely a reflection of their increased risk of being involved in an accident and the higher average value of the associated claims. They said that the reason why premiums had increased at a faster rate for younger drivers was that they were disproportionately affected by the rising number of personal injury claims, because they tended to make claims of higher value. They recommended that greater conditions be placed on driving licences for younger drivers including a minimum 1 year learning period and a limit on the number of passengers that they are able to carry. They also highlighted the measures that were being taken to reduce premiums through tracking devices which had the benefit of both incentivising better driving, and enabling insurers to reward more responsible drivers with lower premiums.

A local insurance broker An Interview with a local insurance broker demonstrated the surprising range of quotes on the market for motorists in all parts of Bradford. In practice some companies offered quotes four to five times higher than another for exactly the same category of driver in the same area. This demonstrated that it was well worth motorists ‘shopping around’ to find the lowest quote but did not help to explain why even the lowest quoting companies were often requiring premiums that were increasing at a frightening rate. The broker produced sample quotes for 18 and 56 year old drivers in six areas of Bradford, which are summarised in Figures 6 to 8 below. These demonstrate the high variation in premiums across the district, and the wide spread of quotes which are available from different companies. It also highlights the extreme level of quotes which are currently on offer for younger drivers, which are in all but one case in the tens of thousands. It is also notable that only one company was prepared to quote for the 18 year old driver in each area. Evidence of the steep rise in premiums was also provided, as well as evidence of further rises to come in future months. He said that there were no significant discounts available for young motorists who complete Pass Plus modules, confirming the view that this measure has failed in bringing down premiums. It was the broker’s clear view that while the cost of uninsured drivers had remained roughly similar over recent years it was the rising cost of personal injury claims that

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has been responsible for the majority of the increase in premiums. When discussing personal injury claims the broker said that in many instances insurance companies were paying out on such claims without challenging them at all because it was cheaper, at £3,000-£6,000 a time, to pay out than to challenge and incur the attendant legal fees.

Figure 7 - Lowest quote for 18 year old driver in selected Bradford postcodes

Figure 8 - Lowest quote for 56 year old driver in selected Bradford postcodes

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Ford Accident Management Ford contacted us about a model of accident management they have developed for their customers which should help to eliminate unnecessary hire costs and reduce unjustified personal injury claims while still representing a viable business model. Ford reported that the average cost of a claim made through an claims management company was £4,583, of which only £1,100 was spent on repairs, while the remaining £3,483 was made up of personal injury compensation and credit hire costs. The companies generated their income through earning a percentage on credit hire arrangements and from referral fees paid by personal injury lawyers. Ford claim that this has resulted in the average claims manager asking a customer 6-7 times if they would like to make a personal injury claim. Ford’s model, which they began operating on the 4th July, offers replacement vehicles at cost, plus a fixed admin fee (£82.50), so there is no incentive to prolong the hire period for longer than necessary. They report that of the 32 customers they had put into hire cars the average duration of hire was just 5 days compared to the average claims management rental of around 19 days. Ford do not accept referral fees, but do ask their customers if they are injured following an accident as part of their duty of care. They report that this has resulted in very low numbers of customers making personal injury claims: only one customer out of a total of 79 at the time of writing. Repairs are organised at authorised Ford repairers using genuine Ford parts, in return for a 10% referral fee. This model is viable through the repairer referral fee, and the admin fee for replacement vehicles, as well as the increased business generated for Ford repairers and increased sales of Ford parts. The Co-operative Insurance The Co-operative Insurance contacted us about new insurance products that they are offering for younger drivers which allow them to reduce premiums over time given evidence of responsible driving behaviours collected via driver information systems. This involves data being transmitted via satellite technology from a ‘smartbox’ fitted into the policyholder’s car. This monitors a driver’s behaviour and, subject to evidence of “responsible driving behaviours”, would result in a “Safer Driving Discount”. The Co-operative referred to a particular case that was covered in the Telegraph and Argus in which a young driver was given an insurance quote £3,000 below the next lowest quote if he agreed to use the new innovation. Tellingly the Co-operative acknowledge even their quote was still a ‘significant premium’ and that: “Unfortunately, the premium reflects our claims experience in parts of Bradford, with high levels of personal injury claims and fraud”

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In addition the Co-operative made some valuable comments about the general issue of high premiums and in particular the “increasing and unwelcome obtrusiveness of the claims management sector” which it believed was contributing heavily to spiralling claims and increases in premiums. The Co-operative suggested that tougher penalties should be introduced for firms engaged in encouraging claimants to falsify claims and was very critical of the practice of cold-calling potential claimants. Specific suggestions for reducing claims costs and premiums were offered by the Co-operative including, carrying out a consumer-led review, the introduction of Legal Expense Insurance cover as standard, publication of invoice costs to be compared to standard commercial rates, and banning the selling-on of claims books to third party firms without the consent of policyholders. c) Doctors We interviewed a local GP about the subject of whiplash injuries (see page 10). The GP confirmed that he had seen an increase in the number of patients presenting with neck pain following road traffic accidents, and had been increasingly contacted by insurers seeking confirmation of injuries for which compensation was being claimed. The GP highlighted the fact that the diagnosis of soft tissue injuries resulting from whiplash relies on self-reported symptoms from patients, and there is no objective physiological test of which he was aware that such injuries were genuine. The GP said that it is not a GPs role to try to refute or undermine a patient’s account of their own symptoms, but that he would try to discourage patients from exaggerating their severity as this was in their own medical interests. When asked how evidential requirements for claiming compensation for whiplash might be strengthened he repeated that this would not be part of a GPs role. However, he did believe that it may be possible for insurance companies to limit the circumstances under which a whiplash injury could be compensated, but that this would require a change in the law. For example, he said that it might be possible to define a minimum speed of collision which could result in a whiplash injury for which compensation could be claimed. Alternatively, he suggested that responsibility for the proper adjustment of headrests could be transferred to the claimant, such that if they could not make a claim for a whiplash injury unless the headrest was properly adjusted.

d) Driving Instructors In response to calls for evidence we were contacted by Advanced Driving Instructors who both expressed their sympathy with young drivers who, on successfully passing their driving test, found themselves with premium quotes of several thousand pounds to insure their first vehicles – in most cases the quotes were several times the value of the vehicles being insured. One of the instructors was of the view that improved training after the driving test for newly qualified drivers would help to reduce premiums but was quite dismissive of the Pass Plus programme and labelled it “a complete failure”. They felt that Pass Plus was of minimal benefit in reducing the risk of accidents and that this was

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reflected in the unwillingness of insurers to give any significant discount for drivers who have completed the course. They suggested that while typical discounts once exceeded £700, they are now around £150-£200 – less than the cost of Pass Plus tuition. Perhaps the most significant thing to emerge from the interviews was the story told by one of the instructors who after expressing what appeared to be genuine sympathy with the unaffordable level of premiums his young clients faced went on to reveal that he himself had been involved in an accident a couple of years ago. At 8am on the morning after the accident had occurred he received a telephone call from a solicitor who had been sold the instructor’s personal details by his own insurance company. The solicitor then acted on behalf of the instructor and the learner driver who was driving at the time of the accident. The instructor ended up receiving £2,500 for personal injury plus £3000 for vehicle repairs whilst the learner received £2,500 for personal injuries.

4.2 Results of residents’ survey a) The survey

The survey was open to Bradford residents and was available online via David Ward’s website from the 14th of July. In addition a number of paper surveys were distributed in the Bradford East constituency with a freepost return address. At the time the analysis was carried out there had been 511 valid responses. Since that time we have received almost double that number.

b) Car usage in Bradford In this section of the survey, respondents were asked to indicate whether or not they used their cars for recreation, commuting or business. Respondents were able to select more than one option.

Do you use your car for...?

% of respondents

Recreation 75%

Commuting 42%

Business 18%

Figure 9 Car use in Bradford

The results show that car insurance costs have the potential to adversely impact on prosperity and economic growth in the region, which is particularly worrying in view of the struggle to overcome the effects of the recent recession and subsequent low growth. The growing cost of car insurance may make commuting such a financial burden, especially when combined with high fuel costs, that people may be forced to compete for already scarce jobs nearer to home instead, or give up their businesses altogether if these rely heavily on transportation. One respondent commented that he had in fact already found himself in such circumstances as the insurance on his van increased from £1,200 to £4,300 last year, putting him out of business.

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Figure 11 Increase in average car insurance rates among respondents 2009-11

Given the majority of respondents indicated they used their cars for recreational purposes, the escalating costs of car insurance clearly also have the potential to have a significant impact on quality of life for Bradford residents, should they be forced to give up their cars as a result.

c) Car insurance premiums in Bradford In this section, respondents were asked to record how much they had paid for their car insurance in the previous two years, and how much they were paying this year. Not every respondent was able to record a figure for each year, but there were enough responses to produce an average figure for each year. Outliers were discarded to avoid biasing the data. The tables and graph below show the average annual amount of car insurance paid by survey respondents over a three year period, and how this has changed in percentage terms.

Naturally this information does not reflect the range of some individual’s experiences which are affected by a number of factors such as age, gender, type of car and claims history. While some respondents had consistently paid premiums as low as £200, others had to pay up to £4,700 to insure their vehicles. Moreover, some respondents actually saw their prices for insurance fall - one respondent’s fell by 65%, while at the other extreme another respondent’s car insurance costs increased by a staggering 339%, from £342 in 2009 to £1,500 this year. These variations notwithstanding, the general trend of a steep increase is clearly evident. This increase far exceeds both the rate of inflation for these years and the average national increase in car insurance prices. It should be noted that, because indexes which track national trends in insurance prices tend to use average quoted premiums (or the lowest three quotes as in the case of the AA Index cited above), they are not directly comparable with the premiums which people have actually paid.

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Figure 10 Average car insurance rates among respondents 2009-11

Figure 12 Average car insurance rates

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This real terms escalation in costs hits people’s disposable income, and this is particularly difficult in times of economic hardship.

d) Causes of high premiums In this section of the survey, respondents were asked to rank what they felt were the most significant causes of high insurance premiums in Bradford on a scale of 1 to 7. The number of times each factor was included in the top three factors was then counted to produce the following graph:

Figure 13 Suggested causes of high car insurance prices in Bradford by respondents

Respondents put forward the prevalence of uninsured drivers in Bradford as the main cause of the present situation. A commonly held view was that the lack of financial and/or legal sanctions for uninsured drivers was in effect incentivising driving without insurance, with respondents typically claiming that it was “mainly the lack of action against uninsured drivers”, as it was “cheaper to not bother [getting insurance] due to low fines if caught”, that there were “not enough convictions for uninsured drivers”. Fraudulent claims were also identified as being heavily responsible, tied to the growing culture and prevalence of ‘no win no fee’ litigation. Respondents noted that under this system people were encouraged to make exaggerated or even completely fictitious claims without incurring any personal costs. One respondent claimed so-called ‘cash for crash’ scams were being organised on a large scale in order to fraudulently gain compensation. This was backed up by the personal experience of another respondent who offered his service as a witness following a minor accident, only to wish he had not bothered after he was contacted by a number of insurance and compensation companies trying to claim inflated compensation for injuries and damage that did not occur.

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A significant number of respondents also blamed ‘greedy’ insurance companies, which suggests a widespread mistrust of the motor insurance industry as a whole, despite its lack of profitability in recent years. However, other organisations such as claims management companies have done very well out of the existing arrangements, and their unscrupulous behaviour has undoubtedly fed mistrust in the claims industry as a whole.

e) Suggested remedial action In this section, respondents were presented with a number of suggested remedial measures which could help to bring down car insurance prices in Bradford. As before respondents were asked to rank these in order of which ones they considered would be most effective, and the number of times each factor was included in the top three factors was then counted to produce the following graph:

Figure 14 Suggested solutions to high car insurance prices in Bradford by respondents

By far the most popular option was to impose tougher sanctions on uninsured drivers, which is unsurprising as most respondents identified this as the primary cause of the escalating costs in the previous section. The additional comments section reflected the anger felt towards uninsured drivers, with a significant number of comments that uninsured drivers’ vehicles should be automatically scrapped, and one person even suggesting this should be made into a public spectacle! More resources for policing was identified as the second most popular course of action suggesting most people didn’t blame the police for the present situation but recognised that due to the pressure on resources, they were unable to tackle the problem effectively.

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Banning ‘no win, no fee’ claims and referral fees also proved popular, suggesting there would be strong support for tackling both the ‘no win, no fee’ culture which has driven up the costs of car insurance in the UK as a whole, and likewise for the banning of the payment of referral fees. The finding is particularly notable as personal injury lawyers have argued that referral fees merely represent a form of marketing which is in consumers’ interests. Similarly, a recent report by the Legal Services Board argued that there was a lack of public support for a ban40. Our survey suggests that in fact public support for such a measure would be strong. Another popular suggestion was the introduction of mandatory insurance discs in car windscreens, which is currently the case for Vehicle Excise Duty. Finding a workable solution may be complicated by the fact that presently the requirement to have insurance falls not only on the vehicle but also individual drivers, but this is certainly an option which merits further investigation. The lack of support for greater competition in the market is likely to reflect recognition that with a multitude of providers, the car insurance market is already competitive and other factors account for the current situation. Finally, the lack of support for measures targeted at young drivers such as monitoring devices, raising the driving age limit or introducing tougher driving tests suggests most respondents do not support further regulation of young drivers, which may impact negatively on even on those who drive responsibly. Likewise, there is no widespread support for monitoring devices for young drivers, which has been suggested as a possible course of action.

f) Impact on Drivers The final section of the survey was directed at people who do not currently drive, and asked if they were likely to start driving in the next few years, and what, if any, impact the high costs of car insurance would have on their decision. Nearly all respondents said that the cost of motor insurance would have an impact on their decision as to whether or not to drive in the next few years, and the vast majority said that it would have a serious impact. This was the case for all ages of driver, whether or not they said that they were intending to drive, or were considering doing so.

40 Referral Arrangements, Legal Services Consumer Panel, May 2010 chapter 9

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Figure 15 Impact of high car insurance on respondents’ decision to drive in the next few years

This pattern was even more starkly evident for young drivers; every single respondent under the age of 24 indicated that the high cost of insurance was going to have either some impact or a serious impact on their decision on whether or not to start driving in the next few years.

g) Summary In conclusion, the survey of Bradford residents highlighted growing concerns about the high costs of car insurance in the city, and in certain postcodes in particular. It was clearly demonstrated that if unchecked, the spiralling costs of car insurance had the potential to adversely impact on people’s quality of life in general, their job prospects and in some cases the viability of their businesses. In just three years, the average annual cost of car insurance for respondents rose from around £550 in 2009 to just under £900, an increase of 63%. Respondents identified the high number of uninsured drivers on the roads, as well as the increase in fraudulent claims, which in turn was facilitated by the ‘no win no fee’ litigation culture and the practice of referral fees. As such, it was unsurprising to see that the suggested remedial actions focused heavily on these root causes; namely introducing tougher sanctions against uninsured drivers, furnishing police with the appropriate resources to intercept uninsured drivers in the first place as well as introducing reforms to the legal system that would restrict the practice of ‘no win no fee’ litigation, and cracking down on the practice of referral fees. 4.3 Local case studies

a) Thematic analysis A thematic analysis of casework regarding car insurance received by David Ward MP revealed the most common complaint was that people with extensive driving experience, who had never had an accident and who had never made a claim against their insurance company, who were nonetheless facing steep increases in the amount they were being charged for car insurance. An especially strong sense of resentment was felt by people who argued that they were being discriminated against purely on the basis of where they lived, claiming

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that some insurance companies were refusing to even consider providing them with a quote, or quoting a prohibitively expensive sum. Meanwhile, they knew that if they lived in another part of the city or the region, in some cases literally only several streets away, they could get significantly cheaper insurance. One respondent even said she was considering moving away from Bradford as it was putting her relationship with her boyfriend under strain, as he would not be able to afford to get his car insured were he to move in with her. Another common complaint was that young people, even those who had passed their test had no realistic prospect of getting affordable insurance, leaving them angry and frustrated. Other respondents detailed their personal experiences of many of the issues outlined earlier in the report. For instance, one respondent described how upon complaining to a taxi driver about the cost of his insurance, the taxi driver proposed arranging a staged accident involving one his friends and in order to submit a fraudulent claim, in return for which the respondent would receive £2,000. Asking if the taxi driver had previously participated in such ‘cash for crash’ scams, he was informed that it was “big business in Bradford”. Another respondent described how after he had had his car vandalised and contacted his insurance provider about it, he was subsequently bombarded by calls from personal claims solicitors and companies. He suspected that his insurance company had passed on his details to them, something which he felt they had no right to do.

b) Case study quotes

G.W. (BD18): “I was speaking to a taxi driver about the high cost of car insurance when he said: ‘let me arrange for my friend to crash into you or the other way around, and we will pay you £2000, plus £500 per passenger in the car’, and he proceed to break down the costs and payments like it was a business he was running. I asked ‘Have you done this before?’ to which he replied ‘Yes its big business in Bradford’.” A.D. (BD3): “I have held a clean and valid driving licence for over 8 years but recently I was quoted £2,200 for a 1 litre engine Nissan Micra which was only valued at £110!” D.S. (BD4): “I was told on more than one occasion by insurance companies that they could not give me a quote for my 17-year old son because we lived in the BD4 area. After passing his test, the cheapest quote we could find was £9,500, to be paid in full.” D.B. (BD3): “£1500 for insuring a Ford Fiesta driven by a school teacher in her fifties, with no points on her licence, no claims bonus and which is kept on our drive.” A.A. (BD16): “I have been bombarded by personal claims solicitors and companies after my car was vandalised. I suspect the initial insurance company passed my details to these people, something I feel they had no right to do.”

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L.G (BD7): “I am a college student and I was over the moon when I passed my driving test after a couple of attempts. I immediately went online to check insurance prices only to be quoted £53,000 for an old Corsa! After an exhaustive search, the cheapest quote I found was for £5,000. I also was told over the phone by someone working for an insurance company that they did not insure people in my area (BD7), and then they put the phone down on me. I am upset and angry that even after passing my test, I am unable to drive.” J.M. (BD8): “My premium has steadily increased despite my vehicle falling in value, me becoming a more experienced and thereby safer driver and my no claims bonus increasing. I find it difficult to believe that rather than focusing on my "risky postcode", insurance companies are unable to assess each individual policy based

on the policyholder’s history.” A.T.: “My boyfriend and I cannot live together as he cannot afford to get his car insured at my address in Bradford. I am seriously considering renting my house out and moving to a cheaper postcode which would be a shame as I moved to Bradford in the first place because it was cheaper and because I like the city.”

A.H. (BD3): “I am 46 years of age, have been driving for in excess of 24 years and have never claimed in my life. This year my premium has increased from £553 to £807, a ridiculous increase of 46%.Quotes from other insurers were in excess of £1,000 while Esure said they were not providing insurance to anyone in my area.”

C.W. (BD9): “My premium is £864 but is due to go up because someone else crashed into me! Oh, and I checked what my premium would be in BD15 (£456) and in KA7 which is where my grandparents live in Ayr (£174!). In fact, try as I might, I couldn't get a premium in Ayr that was as high as £864.”

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5. Summary and next steps Rising car insurance has affected all parts of the UK, but our research suggests that few areas have been worse affected than Bradford over recent years. Average car insurance premiums in Bradford are among the highest in the country and increases have been consistently higher in Bradford than in other parts of the UK. This problem is faced by people of all ages and backgrounds, living in all parts of the city, although some postcodes are particularly badly affected. Responses to our survey clearly show that these huge increases are having an unacceptable impact on Bradford residents and businesses and that urgent action must be taken to bring costs down. The Liberal Democrat Team in Bradford East is determined to bring about a reduction in premiums in the area and this report is the first stage in the team gathering information and developing a fuller understanding of what is clearly a complex issue. The report reveals that there are numerous contributory factors leading to unacceptably high insurance premiums in Bradford, notably:

High levels of insurance fraud. Bradford has one of the highest level of ‘cash for crash’ insurance fraud in the country

Uninsured driving. Bradford has among the highest number of uninsured vehicles in the UK

Exceptionally high levels of personal injury claims driven by a very high number of claims management companies

It is evident that there will be no one, single solution to this problem but we believe, on the basis of our findings, that there is strong evidence for considering the following actions:

Proceeding with measures to bring down the cost of ‘no win no fee’ cases

Regulating the credit hire industry to tackle excessive costs

Banning the payment of referral fees

Setting up a self-funded specialist police unit to target uninsured drivers

Introducing stiffer penalties for failing to purchase insurance

Introducing windscreen insurance disks

Adjusting the evidence requirements for making a whiplash claim

Supporting the rising use of driver information systems for younger motorists but on a strictly voluntary basis with tighter controls on how data can be collected and used

Strongly resisting the European Court of Justice’s ruling that gender cannot be taken into account in insurance underwriting

Proceeding with the proposal to expand the scope of online portal for personal injury claims

We will be carrying out further research into these proposals and seeking high level ministerial meetings to discuss our findings. Some of the changes required may involve work in and through Parliament and we are committed to working with others to bring about the legislative changes that may be needed.

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However, we are convinced that - with or without Government support - we can develop a local strategy to tackle some of the factors that make the problem of unacceptably high premiums particularly worrying for the residents of Bradford East. This ‘local strategy’ will require a partnership approach involving ourselves, local Councillors, the Police, the Youth Service, local schools, insurance companies and brokers, General Practitioners, Driving Instructors, Personal Injury Lawyers and many others. We are extremely grateful to all of the Bradford residents who took the time to fill in our survey and to those who responded to our call for written evidence. Their input has been extremely valuable and will allow us to make a strong case for action over the coming months. We would also like to thank all those who gave up their time to take part in interviews, which were invaluable in helping us to gain a greater understanding of this issue.