Rising cost of motor insurance despite Jackson reforms
Esure has announced that its half-year profits have dropped by £14m from £17.1m in the first half of 2014 to £3.3m in the first half of this year, blaming the rising number of personal injury claims for the profits fall. Personal injury solicitor, Kevin Smith considers the recent trends in motor insurance premiums and the personal injury claims market.
“The insurance industry gave assurances about premiums before the implementation of the Jackson civil litigation reforms and the 60% cut to claimant fixed fees. However in announcing their half-year results the insurer has now highlighted that the recent spike in claims will mean that the rising costs of insurance premiums are likely to continue for the remainder of the year. Meanwhile the AA has also announced increasing costs for insurance premiums and has maintained that rising personal injury claim costs lie at the heart of it.
“The numbers of personal injury claims have been increasing, at a rate of about 10% each year, since around 2013. Indeed for the year 2014/2015 ending in April the total number of claims was only about 2,000 less than the peak recorded in the year before legal fees were cut. Esure, and other insurers, painted a picture of reducing premiums before the implementation of the Jackson reforms and cuts in claimants fixed legal fees, but rather than a reduction in motor insurance premiums we’re seeing the costs of motor insurance rising. Presumably Esure’s profits are not driven by personal injury claims alone but rather a range of products and policies including a large variety of insurance policies and claims against them across their whole insurance portfolio. It would be interesting to see a breakdown of the profit and loss across their full range of services. I’d also be interested to see how income from referral fees – now banned but a previously lucrative revenue stream for insurers – has also impacted on Esure’s profits.
“With the threat of further hikes in the price of Esure’s motor insurance premiums in the second half of 2015 the assurances of the insurance industry prior to the implementation of the Jackson reforms that the cost of premiums would reduce have all crumbled into dust.”
Content correct at time of publication