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John Vander Luit

Editor, Solicitors Journal

Fat-cat insurers are lining their pockets

Fat-cat insurers are lining their pockets


It is time for a root and branch review into the unscrupulous practices of the insurance industry, says Qamar Anwar

A recent investigation by the Daily Telegraph found that insurance companies are charging 'not at fault' drivers up to 100 per cent more for labour than the repair costs actually incurred, thereby giving insurers a £750m windfall each year. The knock-on effect for drivers is an extra £22 per year, on average, to their annual premium.

Prior to the paper's investigation, First4Lawyers had been looking into the financial reports of a number of UK insurance companies. One of these companies is UK Assistance Accident Repair Centres Limited, which trades under the name DLG Auto Services; its parent company is Direct Line Insurance Group Plc (DLIG).

The company's annual report states that its principal activity continues to be the provision of motor vehicle repair services to the general insurance companies owned by DLIG. In 2015, it had revenues of £133m up from £119m the previous year, making it an operating profit of £36m '“ up from £29m. It made a dividend payment of £25m during the year (£12,500,000 per share) compared to £16m the previous year. The holder of these two shares was DLIG.

The accounts also detail both the revenue from vehicle repairs, and the cost of vehicle repairs. Revenue in 2015 was £132,967,000, while the cost of repairs was £76,057,000 (parts and service) the difference between the two figures, £56,910,000, translates into a staggering 74 per cent mark-up.

However, this company is by no means alone among its peers, and all of this comes at a time when the insurance industry's lobbying has reached its peak with the government's planned introduction of a Civil Liability Bill, supposedly aimed at reducing the cost of whiplash claims to the average motorist.

Insurers have long argued that false whiplash claims are costing innocent motorists, and that the introduction of these reforms will reduce premiums. However, this recent investigation into their practices shows we cannot trust the word of insurers who try and milk the system for as much cash as they can. It is therefore fanciful to think insurers will pass on any savings to consumers.

Whiplash reforms will not reduce the cost of insurance, they will only punish those with genuine claims who will no longer be able to afford to seek justice if they're injured. The reforms, which propose introducing a new tariff system, could see innocent victims of road traffic accidents receive as little as £225 in compensation. It is clear that greedy, fat-cat insurers are lining their pockets, while blaming innocent motorists for the rise in premiums.

A recent freedom of information request by the Association of Personal Injury Lawyers found that whiplash claims are falling, yet premiums continue to rise. How can we trust insurers to honour their word that premiums will be cut with the introduction of yet more whiplash reforms?

It is high time for a root and branch review into the unscrupulous practices of insurers before any new reforms are considered. If the insurers want to cut costs for innocent motorists, maybe they should look a bit closer to home.

Qamar Anwar is managing director of First4Lawyers