Telematics – The Next Step For Cheap Car Insurance?

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Telematics – the recording of vehicle movements and driving style rouses mixed emotions when discussed. It’s amazing that this technology has not been introduced sooner. Insurance company Aviva attempted to introduce this back in 2005 to tackle the issue of insuring young drivers, but it did not catch on and it was dropped in the main. Since then a range of factors have influenced its resurgence – principally costs have lowered and the scourge of spurious claims have increased. Surely for insurers, it’s a win-win situation. Driving styles and even G-forces are recorded dictating the level of compensation for whiplash injuries. Erratic driving can be pinpointed and underwritten accurately and, with the forthcoming EU gender ban to come into force later this year, premiums can drop with clear data to support it. Women between 17 and 25 are expected to pay an additional £4300 on average between this period when the ban effects them according to industry experts. Therefore, to prove that women are indeed safer drivers, the wish to have black boxes in their vehicles could well be compelling.

Telematics is not new. Commercial vehicles have had this technology of sorts for a while and courier and taxi firms have had accurate tracking capabilities almost always implement these. The burning issues however relate to cost – i.e. who pays for it – and the Big Brother argument. Whilst there may be underlying interest in where you’re going or what time you travel, from an insurance perspective there cannot be many arguments as to the overwhelming positives associated with installing this technology. After all, statistics have shown that just by knowing that driving habits are monitored, this alone affects driving styles. Of interest is seeing if these boxes are portable – if someone takes out short term car insurance and uses someone else’s vehicle. The owner certainly won’t want someone else’s driving style tainting their own. It will be interesting to see how the next five years sees any wholesale introduction. The question is where will it stop – will everyone be subjected to wearing cameras whilst working as a tradesman for example to survey accurate liability claims? Will this also give cheap plumbers liability insurance as a result, for example? As technology improves, this will probably be the only way forward.

Backlash for Whiplash?

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Finally, there looks to be good news for motorists insurance premiums as the Transport Select Committee have announced that claimants should have to prove that they have suffered whiplash injuries following an accident. This is a major cause of increased insurance premium costs as Accident Management companies hijack claims and encourage spurious claims for whiplash, extortionate hire car costs and legal fees for claims that would historically have been a fraction of their cost today. MPs also want insurers to be banned from selling any form of customer information and intends to ban them from receiving referral fees for this information, but only for personal injury claims.

According to the BBC News website, Louise Ellman, chair of the Transport Committee, said: “Insurers, solicitors and claims management companies have themselves driven up the cost of motor premiums by encouraging people caught up in road accidents they did not cause to claim for personal injury, car hire, and other legal costs.” “The insurance industry must abandon sharp practices that push up premiums such as passing drivers’ personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms,” she added.

There has been a 70% rise in motor insurance claims in the past six years, the Transport Select Committee pointed out, despite a 23% drop in the number of casualties actual caused by road accidents and that whiplash claims accounted for nearly 70% of all Personal Injury claims (PI as it is commonly referred). However insurers in the cheap motor insurance and cheap 1 day insurance market find it very difficult to defend against these claims as the injuries are currently very much “subjective”.

Louise Ellman also added “The threshold for receiving compensation in whiplash cases should be raised and, if the number of such claims does not fall significantly, the government should bring forward primary legislation to require objective evidence – both of a whiplash injury and of it having a significant effect on the claimant’s life – before compensation is paid”. This basically means prove it or no claim will be paid – which is good news for honest claimants who have a legitimate claim and have nothing to fear but claims farmers will be fighting a lost cause.

Interestingly, the ABI agreed that the payment of referral fees should be banned altogether, but to all organizations and not just to insurers and stated that customers are fed up of paying high short term car insurance premiums to line the pockets of “ambulance chasing lawyers and claims management companies”. Nick Starling of the ABI was quoted as saying “It is absolutely critical that Britain’s whiplash epidemic is tackled once and for all and the select committee’s acknowledgment that the bar to receiving compensation for whiplash is too low is a step in the right direction,”

This is not a new concept – In the past year the insurance industry and its compare short term motor premiums have come under increasing scrutiny:

• March 2011 – the TSC accused the insurance industry of encouraging claims through the payment and acceptance of referral fees.
• June 2011 – Jack Straw described this system in the insurance press as a “dirty secret” and a “racket”, in which insurers sell information about customers who have been involved in accidents to solicitors who then encouraged them to make claims.
• September 2011, the Office of Fair Trading (OFT) began looking at why motor premiums have been rising fast The government also agreed to change the law to ban referral fees in personal injury claims
• October 2011 – the Parliamentary Justice Committee of MPs said the payment of such fees only encouraged organisations to sell data without permission, and said that any impending ban should apply to all referral fees paid by lawyers to third parties
• December 2011, the OFT launched a full investigation into car insurance costs, including the cost of hire cars and accident repairs.

The Lords are scrutinizing the Legal Aid, Sentencing and Punishment of Offenders Bill, which has been amended to put in place the ban on referral fees relating to personal injury cases.

The Transport Committee’s report concluded: “We recommend that the government send a clear message to the insurance industry that it expects the data protection legislation to be fully respected and we echo the recommendation of the Justice Committee that the stricter penalties for breaching the [Data Protection] Act, passed by Parliament in 2008, should be brought into force,” the MPs added

Ouch! Will This Affect My No Claims Bonus??!

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Picture the scenario – you wake up in your salubrious surroundings, have nothing to do and decide to take a jaunt in your shining, sexy prancing horse complete with its flowing curves and delicious exhaust note. Even better, you meet up with some like-minded and (presumably) wealthy compatriots who also are nestled in sumptuous surroundings being teased and flirted with by a throbbing around them… One beast was particularly Bullish, one in shimmering white, all jostling for attention except a lowly green wallflower – but she can keep going and going without much energy.

Then the banging started, the whole group.

A Lamborghini, three Mercedes-Benz, eight (!) Ferraris including a rare white Testarossa and a lowly Toyota Prius were all involved in a huge pile up that is understood to been have caused by one of the vehicles changing lanes and hitting the side barrier. This has been described as the most expensive sports car pile up history. Reports have indicated that the total cost of the claim will reach £2.6 million as total losses which, of course, will not replace the vehicles. The accident occurred in Japan when a group of like-minded enthusiasts set off for a day to Hiroshima, only to wreck the entire entourage.

Sorting out the resulting insurance issues would be a logistical nightmare. No doubt multiple insurers are involved, there would be disputes over estimations, disputes over costs, quantifying injuries, keeping legal expenses from escalating. This is assuming that the Japanese system works in identical fashion to the market within the UK. Most people who compare cheap car insurance even 1 day car insurance will almost certainly not get “agreed value policies” An agreed value policy guarantees the replacement of a vehicle should a total loss or theft occur. These are usually promised when a policy is taken out and would be subject to at least six photo’s of the vehicle and potentially an engineers report or car club report. Then, and only then will an insurer pay out the promised value – normally only vehicles over ten years old would qualify in any event. In the absence of this, the current market value would be paid.

Then there are the excesses and on vehicles like this it would not be unusual to see a £2500 excess….

Talk about Gone in Sixty Seconds…..