Insurers not willing to pass on whiplash savings to consumers for at least another two years – Fitch
Leading credit ratings agency Fitch has revealed that it doesn’t expect the cost of car insurance premiums to fall for at least another two years – despite the UK government’s ongoing whiplash reforms.
Price drops in motor insurance have been expected as insurers pass on savings after the government introduced new proposals designed to reduce the instance of false whiplash claims. However, according to Fitch Ratings insurance premiums will continue to rise because the levels of reserve released that have supported profitability amongst insurers in the past few years are ‘unsustainable’ in the long term. In a recent report, Fitch said: “Premium rates are still below 2012 levels and we believe more rises are inevitable”.
Following the then Chancellor George Osborne’s autumn statement, which proposed an increase in the small claims limit and a ban on general damages for soft-tissue injuries, the Ministry Of Justice has been preparing a consultation.
However, Fitch’s report states that even if the whiplash proposals are fully implemented then insurers will still be “reluctant to pass savings on to consumers before seeing evidence of reduced claims costs.” It subsequently concluded that it does “not expect the reforms to significantly affect prices before 2018.”
The issue of reducing premiums is an important element of the insurance industry’s current lobbying for further market reform, with Associate of British Insurers director Huw Evans last year promising that in a “highly competitive motor insurance market, insurers will continue to pass on savings to customers”.
The Ministry of Justice has said that they expect the proposed changes to legislation will result in an annual reduction of about £50 to the average car insurance premium, although just two insurers have so far publicly committed to such a reduction.
The government has also admitted that it has no intention of intervening in the market to make sure insurers pass on their savings to their customers.