Motor Vehicles: Insurance

Treasury written question – answered on 4th July 2012.

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Photo of Margaret Ritchie Margaret Ritchie Shadow SDLP Spokesperson (Environment, Food and Rural Affairs), Shadow SDLP Spokesperson (Energy and Climate Change)

To ask the Chancellor of the Exchequer what assessment he has made of the implications for his Department's policies of the report from the Office of Fair Trading on the cost of car insurance; and if he will make a statement.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

The Government welcome and support the OFT's work highlighting the lack of control over vehicle repair and replacement services in the motor insurance market. This is another added pressure to increase motor insurance premiums faced by the insurance market. We expect the focus of competition between motor insurers to be on providing quality and value to customers; practices which drive up premiums without benefitting policyholders are unacceptable.

The Government are mindful of the impact of the current cost of this insurance and has set out measures to tackle this by addressing the compensation culture, reducing legal costs and cutting red tape. In February the Prime Minister met with representatives of the industry to discuss these issues; agreed measures include the following:

an industry commitment to pass savings onto customers resulting from a Government commitment to reduce the current £1,200 fee that lawyers can earn from small value personal injury claims; industry commitment to adjust premiums to reflect any reductions in legal costs created through the Jackson reforms that will reform “no win, no fee” and ban referral fees; and extending the road traffic accident claims process to cover employers liability and public liability; and the Government and insurance industry committed to work together to identify effective ways to reduce the number and cost of whiplash claims.

We hope that the outcomes of the OFT's review add to the ongoing efforts to reduce costs for motorists.

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