ABI: repair costs a drop in the ocean compared to impact of IPT, Discount Rate and whiplash-related claims on motor premiums

The ABI has hit back at the claimant legal community after it accused insurers of being hypocrites for inflating motor repair costs while calling for curbs on low value RTA claims.

The insurance body has said that repair costs are a “drop in the ocean” compared to the impact of the Insurance Premium Tax, the new Discount Rate and whiplash-related claims on the cost of motor premiums.

Responding to a Daily Telegraph story that had reported that insurers routinely inflate repair costs by as much as 100%, and receive undisclosed kickbacks for the difference, the ABI said that the practice was in line with other sectors who use economies of scale helps control claims costs.

“It is common for a motor insurer to agree what are effectively bulk discounts with car repair companies,” said an ABI spokesperson.

“When an accident occurs and the non-fault insurer initially pays for repairs, they are under no obligation to pass on these discounts to their competitors when they seek reimbursement from the at-fault insurer.”

The spokesperson conceded, however, that the system could work better and that the insurance industry welcomed the investigation by the Competition and Markets Authority (CMA) in this area in 2014. The CMA did not chose to take action following its investigation.

“Repair costs still contribute less than a fifth towards the cost of a motor premium compared to more than a third for personal injury pay outs. Costs involving discounted repairs are a drop in the ocean compared to the impact on motor premiums arising from the increasing complexity of repairs, the rise in Insurance Premium Tax, changes to the Discount rate and whiplash-related claims.”

Mark Dugdale