Insurers have not passed on all savings to motorists’ premiums, says Budsworth

Insurers may have saved at least £2.85 billion pounds in claims costs over the last two years, and motor premiums should be much lower than they are, according to Craig Budsworth, the chairman of the Motor Accident Solicitors Society (MASS).

Budsworth has challenged figures produced by the AA, which suggest that the insurance industry has passed on nearly 17% of savings to motorists over the past year since the introduction of the Jackson reforms, saying that there is scope for insurers to have passed on a further 13% in premium reductions.

Speaking at an ABI conference looking at whiplash claims and the effects of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act on 13 May in London, Budsworth, who is a partner at Garvins Solicitors, also asked whether the claims industry was happy that the savings being passed by insurers were at a cost proportionate to the reduction in access to justice.

When questioning the figures produced by the AA, Budsworth said the the number of new claims logged on the Portal was nearly 100,000 lower in 2013-14 than in the same period between for 2012-13.

"If you take into consideration that costs payable, including insurance premiums at an average £400 and success fees, on 100,000 cases this would be around £175 million," he said.

"When you then add the other 710,000 logged cases, where costs are reduced further, then you can see that the savings would be significant. In fact, with these averages and assuming every case stayed in the portal, then the total spend by insurers, on costs, in 2012-13 would have been £1.5 billion, whereas for 2013-14 this would be £387 million."

He said that when the average payment on the 100,000 fewer cases was factored in, then the savings made increased by another £250 million.

"This is just PI and doesn’t even touch on the figures quoted by the Competition Commission enquiry showing the number of claims in 2012 being half a million down at their average quote of nearly £3000 per case," he added.

"You could say that in the last two years, insurers will have saved at least £2.85 billion pounds in claims. 2011 figures, the last easily available through the ABI, show claims spend at £9.3 billion. So if my maths is right, this means premiums should be down over 30%.

"Unless of course you are a shareholder in an insurer watching the hundreds of millions of pounds being made at the expense of the consumer and accident victims."

Mark Dugdale