Car Insurance — [Philip Davies in the Chair]

Part of the debate – in Westminster Hall at 6:34 pm on 5 March 2018.

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Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy) 6:34, 5 March 2018

It is a pleasure to serve under your chairmanship, Mr Davies.

I congratulate Susan Elan Jones on introducing the debate on behalf of the Petitions Committee in her characteristically balanced and thoughtful style. She presented it very well. I particularly liked the way in which she highlighted how the petition’s suggestion of insuring cars rather than drivers might help to limit the number of uninsured drivers on the road. In my experience, a lot of the uninsured drivers who cause problems tend to be uninsured for other reasons than cost—they may have lost their licences for various offences, or they may be serial offenders—so insuring cars might not completely eradicate the problem, but it is certainly worth considering.

I also liked the way in which the hon. Lady highlighted the key issues that should be considered before changing insurance legislation, including cost, personal injury, the possibility of helping the innocent to achieve justice, and overall safety—an issue that Jenny Chapman picked up on when she spoke about graduated licences.

The hon. Member for Clwyd South also highlighted the possible dysfunction in the market. There is no doubt that many people are cynical about how the insurance market operates, so it is always good to shine a light on it and have transparency. She mentioned insurance premium tax, which was increased a couple of years ago in yet another Budget whammy. The cost of insurance for young drivers is a major issue. The hon. Lady asked the Minister to consider freezing insurance premium tax; I would like the Government to go further and consider introducing age restrictions on it. The cost of insurance for young people is so prohibitive that the extra 10% or 12% on top of their already big premiums is a real hit.

The hon. Member for Darlington mentioned insurance premiums and then raised a matter that was perhaps a bit off topic but that is clearly very important, because she is supporting her constituents in a case that has been really harrowing for them. I certainly understand the arguments for a graduated driving licence scheme and I look forward to the Minister’s response. Her teenage sons might not appreciate such a scheme, and nor might many other young people, but in the light of the wider consequences for safety, we have to consider the matter seriously. I commend her for raising it.

It is clear that the issue is not as simplistic as car-only versus driver-only insurance, as the petition suggests. The United States system imposes liability insurance requirements on drivers, and many US car insurance policies include restrictions, although they may be as simple as a requirement for a manual driving licence—many cars in the States are automatic and many people have automatic-only licences. The Association of British Insurers lists other considerations relevant to a change in the UK insurance market system, such as experience with particular types of vehicle or age profile. Many car-only insurance policies include restrictions on the age and experience of drivers. It is not quite as simple as someone insuring a car and then all their friends and family being fully insured to drive it.

The petition is loosely based on the situation in Portugal, but as the hon. Member for Clwyd South correctly highlighted, the market in Portugal is not straightforward either. I know from experience that in the United Kingdom it is possible, even under the current market set-up, to insure a car such that other drivers than the named driver are fully insured to drive it. My dad’s car has been insured for many years to cover any valid driver who has his permission to drive it and who holds the necessary licence, although I believe there are some restrictions relating to penalty points and minimum age, so it is clearly possible to get car insurance that includes the flexibility for friends and family to drive.

I, too, have a teenage son, so I can certainly see the arguments and attractions of a car-only insurance premium, which might make driving less cost-prohibitive for young drivers. Certainly my 18-year-old son, Dylan, advocates such a system, because he thinks it will magically reduce his premiums. Clearly, however, it could only reduce premiums for him if we all pay a much higher share ourselves, so again there would be winners and losers, although it might make the market slightly easier for young drivers to enter into.

As the hon. Member for Clwyd South highlighted, this petition has a decent number of signatures—56,000. Last week, when I first got notification of the debate, I think it had 45,000 signatures, so there has been a considerable increase in the past week or so, which I imagine must be due to the interest generated by this debate. At the least, this debate is highlighting an issue for more people to think about.

Only eight of my constituents have signed the petition, so it is fair to say that it has not really caught the imagination of my constituents, or of others; perhaps that is why the Chamber is not quite as busy as it might be for some other petition-led debates. Of course, that does not invalidate the legitimacy of bringing forward the debate and allowing Members of Parliament to consider the issue, and to challenge the Government to consider the possible change that has been highlighted in the debate.

The scenario given in the petition is that a group of friends goes out drinking, and the driver who is responsible for the vehicle gets drunk and cannot drive it. If the car was insured through a car insurance policy, another driver—one of his friends—could drive it home. For me, it is not necessarily a credible proposition to introduce primary legislation for such a scenario. I suggest that education and better planning by people going on a night out is the best way to deal with that scenario. Otherwise, it might end up with somebody driving the car who does not have experience of that car, and if his friends are intoxicated he might not get responsible instructions on how to operate the car. As I see it, that would impose risks rather than being a benefit.

Ironically, if the future of the driving world is as predicted by the Government and many experts, we will have autonomous vehicles taking over rather than driver-led vehicles. In the bright, new, shiny world of the future, we will have driverless cars and therefore, in that scenario I just mentioned—friends going on a night out—there would not be a designated driver, because there would be an autonomous vehicle that could pick people up and safely take them home.

I sat on the Bill Committee for the Automated and Electric Vehicles Bill, in which the Government are legislating for car-only insurance for autonomous vehicles, because the risk model and functionality of those cars, as opposed to driver-led cars, mean that the insurance industry is saying that they need to be insured on a car basis, rather than on a driver basis. That is going through the legislative process at the moment and it may be that driver-led insurance gets phased out in the future.

The reality is that insurance is a risk-based market, so for the insurance market to function properly the insurance companies need to be able to assess the risk and quantify that risk to be able to set premiums. If they get it wrong, there are two scenarios. If they get it wrong and charge too much, they make excessive profits and those paying for insurance pay even higher premiums. If they get the risk model wrong, frankly they will go bankrupt, and if more companies went bankrupt there would be a shrinking market, which could lead to the worst cartel or monopoly situation. That would invariably drive up insurance premiums in the long run.

I will conclude by saying that we should never say never in terms of the changes that might happen, and I will be pleased to hear the Government’s response to the debate. At the moment, however, I am tempted to agree with the initial Government response to the petition—namely, that the change might not be the silver bullet we hope for and might not give the greater flexibility or the reduced premiums that we are looking for. I think that, on balance, the initial Government response is probably correct, but I would certainly like to hear what the Minister has to say about some of the other matters that have been raised today.