Legal Cost Specialists

No lowering of premiums?

It is more expensive to insure a valuable sports car than a second-hand Fiesta. It is more expensive to insure a car in an area with a high vehicle theft rate than one with a low one. Motor premiums are higher for young men than for older women. Premiums are higher for those with a bad claims record than for those with a good one. Why should this be? It’s as though insurers somehow base the premiums they charge by reference to the average amounts they expect to pay out when claims are made.

However, we know that this is not the case. How do we know? Because claimant lawyers continuously tell us that if the legal costs that insurers pay out are reduced, as a result of the Jackson proposals and a lowering of the fixed fees in the Ministry of Justice Portal Scheme, it will not lead to a lowering of motor premiums (see example). This is because those greedy insurers will keep any savings for themselves as increased profit.

So, if motor premiums are unrelated to the amounts that insurers pay out, what are they based on?

14 thoughts on “No lowering of premiums?”

  1. Objective as ever. all stakeholders are in this to make money – they are businesses. it is not in their interest to pass on savings – that reduces dividends

    See the RSA repair case earlier in the year. Gives valuable insight as to the modus operendi (spelling?) of insurers

    Besides, I doubt they are worrying about what claimants saying and would imagine they are more worried about the proposed OFT investigation

  2. All you need to do is look to the Banks to gage whether it is likely that savings will be passed onto customers. Not very!

  3. What a hypocritical society we live in.Those who throw stones should not live in glass houses comes to mind! Just think when referral fees are banned how much insurers will lose out selling poor old joe publics claim. Just think how much they will make when they start pushing BTE policies because ATE wont be recoverable. You watch BTE premiums rise through the roof! How many times do you get the sales pitch to take out BTE when renewing your car insurance! ask yourselves why!!

    Lets get real folks! we are being shafted whichever way you look at it. What can we do about it! Nothing thats what. Lie down and take it because insurance is big business and noone will listen! Thats my rant for the day. Have a good weekend all, except anyone who tried to sell me insurance today!!! LOL

  4. As a former insurance bod, I can tell you that one of the most important factors in setting the premium is the market-share of that insurance company in a particular postcode.

    If the insurance company has a low percentage of the total share in a particular area then the premiums will be lower to get more business. That is seen as being more important than other risk factors.

    Also – another insurer I used to work for used to grade the job of the customer as a much higher risk factor than theft risk / location / claims history. Basically that insurer made an “underwriting” decision that manual workers were untrustworthy scum and professionals were much more likely to be honest (make of that what you will). The fact that a well paid professional usually has a much more expensive car with more expensive repair costs didn’t come into it.

    Premiums are generally higher for the unemployed, but that particular insurer would prefer a university graduate who was unemployed rather than a pipe fitter with 20 years no claims bonus.

    Also – I believe Admiral Insurance have admitted that only 48% of their income comes from the sale of insurance products, the rest coming from their selling of claims details and getting referral fees. A recent CPD lecture I attended stated that Admiral have advised that their premiums would go up if they weren’t allowed to get referral fees.

    “Underwriting” on the high street is as much to do with company ethos & internal politics as it does with actual risk criteria.

  5. I rest my case! risk comes in many shapes and form. Discrimination comes to mind! Lets hope the powers that be keep a close eye on the insurers and their business models/ethics once referral fees are banned but dont hold your breath! perhaps Justice Jackson could start a review of the insurance market and their business practices, now that would be an interesting report to read! He may even get more co-operation than Costs Judge O’hare did when he tried to investiagte the market years ago!!

    My problem is the poor pensioner who has no idea why their premiums have gone up and just pay without question – who protects them!!

  6. Great! have you ever tried to log a complaint with the OFT! I have. Expect months of delay and prepare to be fobbed off! try explaining the procedure to a pensioner how to log a formal OFT complaint. Most dont even have a computer and struggle how to use one! Its all wrong and full of red tape,complex procedures and you might aswell print it in doubledutch!just like most complaint procedures. Its time to get rid of the red tape and simplify proceedures dealing with all types of complaints, that includes Solicitor Act issues.

  7. Fantatsic news – lets all wait for the report and conclusions in 2 years time then!!! In the mean time think of the millions of pounds the insurer will make until their practices are curtailed!

  8. On a completely different topic, but i thought it might be of interest to yourselves:

    Working for a defendant in clin neg claims, we made a P36 offer to settle for £XXXX [very low end of five figures] in March 12. The claimants indicated in June that they did want to settle for the amount we had offered but that their solicitors wanted all of their costs to date.

    This was refused on the basis that we had made a P36 offer for the very purpose of costs protection and there was no good reason to accept their costs after the 21 days from the offer.

    …So the claimants have now made their own P36 to us, FOR THE SAME AMOUNT as our offer!

    Furthermore they state that if this is not accepted then they will issue proceedings and incur the costs of an ATE premium, worth £8500!

    Absolutely. Bloody. Outrageous.

  9. Robert Pettitt


    It’s fact dependant.

    I’ve sought full costs where the defendant’s offer was made without sufficient information to assess the offer – there is a 2000 case (whose name escapes me) where Lord Woolf makes some obiter comments to the effect that a Part 36 will not have protection if parties do not provide sufficient information to allow the opposing party to consider the offer. Also see the more recent case Thompson v Bruce [2011] for other considerations.

    Now those cases go to whether the ‘normal’ rule should apply if an offer is accepted out of time.

    What I found to be more commonly the case is that the majority of Part 36 offers I deal with fail to comply with 36.2 in some shape or form (more than 60% I would say). The biggest failing is compliance with the the ’21 day period’ rule (see Thewlis v Groupama).

    The usual wrong wording is ‘the offer can only be accepted after x days if we agree liability for costs’ – Good bye Part 36 protection!

    Now I do question whether D’s offer was a proper Part 36 offer, because a Part 36 offer accepted out of time is an accepted Part 36 offer even if the parties have not agreed costs terms (i.e. the damages are agreed and the costs are to be determined by the court). Equally, the claimant may have accepted a proper Part 36 offer out-of-time and has not realised that an acceptance has taken place.

    [I’m not after Dominic Regan’s job! But it is weird how Part 36 has become contentious out of nowhere]

  10. i am bo no means any expert on Part 36 – thankfully to date hasnt really caused me any problems

    You seem to have an accord in principle on quantum. Can you not just accept their offer and make an application at the same time that their costs be limited to 21 days after the March offer and that D gets costs thereafter?

  11. The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 26% of the UK’s total net worth and contributing £10.4 billion in taxes to the Government. Employing over 290,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with 28% of its net premium income coming from overseas business. My background was the insurance industry all Cameron and the Eton Club see are the numbers above, this means the insurers do what they want, when legal costs are reduced then a lot of defendant firms go out of business, Cameron and the defendant firms are being used then will soon be thrown in the bin, switch the light off when you leave. By the way premiums will go up, I emailed my friend Otto at the ABI asking him to deny all of this some time ago, guess what doesnt have the guts to respond, silence speaks volumes!

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