Insurers 'cry wolf' while raking in profits
Thompsons launches #FeedingFatCats and calls out insurers' â€˜insatiable appetite for profit'
Some of the UK's biggest insurers have been challenged to explain bumper profit increases while hiking up the costs of insurance premiums and railing against 'spurious' personal injury claims.
Releasing its half-year results this week, Direct Line has increased its operating profit by 9.5 per cent to £354.2m. Meanwhile, RSA posted a 15 per cent rise to £360m despite taking a £42m hit relating to March's revised discount rate, cut from 2.5 per cent to -0.75 per cent.
Elsewhere, Aviva's half-year results show that operating profit from UK motor insurance increased 9 per cent from £530m in 2016 to £580m this year. And Axa also reported a strong half year performance, with a 6 per cent growth in revenue from UK motor insurance.
Commenting on Axa's 'very strong' results, its chief executive, Amanda Blanc, said the insurer was facing 'some strong headwinds'. 'The impact of spurious whiplash claims and the activity of claims management companies already place intense inflationary pressure on motor premiums and we continue to work with the government and the wider industry to combat this.'
The financial results will raise eyebrows among consumers '“ who have seen the average cost of comprehensive car insurance cover rise 19.6 per cent in a year to a record high of £690 '“ and personal injury specialists who have been accused of inflating the cost of insurance through bogus whiplash claims.
In early 2017, Direct Line raised its customers' prices by 6.6 per cent, blaming the hike on plans to adjust the discount rate. However, in its half-year report the insurer acknowledges that 'bodily injury claims continued to trend more favourably than expected'.
Law firm Thompsons has launched its #FeedingFatCats campaign to highlight the impact of potential government reforms to the personal injury sector. The firm has also called for all insurers to be more transparent about how they calculate insurance premiums.
The call follows a Telegraph investigation which revealed motor repair costs were being inflated by as much as 100 per cent. The paper published evidence of Axa 'instructing a repairer to charge 'not-at-fault' customers a labour rate 54 per cent higher than the rate paid by other customers'.
Tom Jones, head of policy at Thompsons, said: 'The government is under pressure from insurers to change the law to make it more difficult for those injured on the roads or at work to make a claim for damages '“ insurers claim there is a 'compensation culture' and a whiplash epidemic and the only way to lower prices for motorists is to restrict access to justice for anyone injured anywhere.
'But they are keeping quiet about the £8bn they have saved in the last few years and they don't mention that last year road accident claims dropped by 7 per cent and workplace accident and disease claims by 21 per cent. What we really have is fat cat insurers' with an insatiable appetite for profit refusing to be transparent and no one in government prepared to call them out.'
Jones also criticised Axa and Aviva for 'blaming everything and everyone else' for insurance premium rises, including whiplash, fraud, insurance premium tax, the discount rate.
'The insurers are constantly crying wolf and the government needs to stop pandering to them,' he said. 'They claim their backs are against the wall but in reality, as Aviva and Axa's figures prove, it's all looking pretty sunny for them and their investors.'
John van der Luit-Drummond, deputy editor