Dear Simon Kirby MP
I have been concerned about high car insurance premiums in my constituency for some time.
I first started to look into this issue in 2013 after I began to receive a large number of complaints from residents. I decided to undertake an extensive piece of research across the constituency to see if the reality matched up with the stories I was being told (and my own experience). My own 'shoparound' revealed the difference in price because of postcode. At that time, a 40 yearold man with no previous motoring convictions driving a Vauxhall Corsa would have paid around £1,100 a year. In Sutton Coldfield the same man would have paid £650. Hundreds of residents responded to my survey and over half of the respondents were paying over £1,000 despite having no motoring convictions. Many were paying over £2,000.
I recently came across a report published by Thompsons Solicitors, entitled “Ethnic Penalties in Motor Insurance”, which found that any motorist living in areas with a high proportion of ethnic minority households is being charged higher prices for their car insurance regardless of any other factor. The report can be found here https://www.thompsons.law/media/1839/ethnicpenalties.pdf
This does not surprise me and mirrors the experience my constituents. The researchers additionally found the following:people who live in multi-ethnic districts pay an ‘ethnic penalty’ in higher-than-average motor premiums of up to £458. Variations cannot be accounted for by prevalence of crime, or fear of crime, available claims data or relative affluence.
I believe that this is a credible piece of research and the Government must provide a credible response.
I believe the Government should launch an inquiry into this issue to ensure that some consumers are not being unfairly discriminated against.
Shabana Mahmood Member of Parliament for Birmingham Ladywood
Shabana Mahmood MP has received a disappointing reply from the Government Minister responsible for car insurance. The letter is attached.
I first started to look into the price of car insurance in 2013 after I started to receive a large number of complaints about its price. I decided to undertake an extensive piece of research across the constituency to see if the reality matched up with the stories I was being told (and my own experience).
My own 'shoparound' revealed the difference in price because of postcode. At that time, a 40 year-old man with no previous motoring convictions driving a Vauxhall Corsa would have paid around £1,100 a year. In Sutton Coldfield the same man would have paid £650. Hundreds of residents responded to my survey and over half of the respondents were paying over £1,000 despite having no motoring convictions. Many were paying over £2,000.
It was clear. My evidence shows that residents here are paying significantly more for the same product regardless of their individual circumstances and that this is because of their postcode.
The Government has looked into car insurance fraud and taken some steps to try and reduce it (the hope being of course, that if you reduce fraud then you bring down the cost of the premium more generally). They have recently said that they will look at whether to end the right to cash compensation for minor whiplash claims - I support this as whiplash claims in the UK are far more prevalent than in a number of other European counties. I also support and am campaigning for insurers to share their data about known fraudsters. This is not really happening yet but it needs to. Similarly we should insist that people who suffer whiplash are seen by a doctor within a proscribed length of time after the alleged crash and we should consider whether we limit the length of time within which you can bring a personal injury claim (it is currently 3 years).
Whiplash and fraud affect our area badly because we are often named as one of the "cash for crash" hotspots - if we reduce cash payouts for small injuries, share better data about people repeatedly involved in "cash for crash" scams and introduce a range of other deterrents then I hope we will see this scourge reduced in our area.
I am not however convinced that these fully explain such markedly higher premiums. The 'cash for crash' problem is estimated by Aviva, who have recently done a big piece of work on this, to add £14 onto the average premium. This additional cost to insurers does not in any way explain the massive uplift in premiums in our area.
So I am also looking at other factors that could cause the price to be high in our area. There are a number of problems within the car insurance industry itself that I would like the Government to take more action on.
Claims management companies is one of those; these companies somehow seem to be connected with the high numbers of personal injury claims in England. During a 2010 select committee hearing a witness made a very pertinent point about the correlation between the number of claims management companies and the number of claims.
"Dr David Brown: The other benchmark you can look at is Scotland, of course, where there are no referral fees and the absence of claims management companies. There the rates of bodily injury claims that are made per accident are about 10% to 20%; let us say 15%. That gives you an idea of the extent of the uplift that comes from that activity"
I am fairly convinced that there would be no loss to the general public if these companies were simply outlawed and I recently wrote to the Government to ask what its view was on abolishing them.
The final area where I am currently conducting my own research is around postcodes and vehicle crime numbers. We are often told when we renew our car insurance in our area that it is because vehicle crime is high. I am currently looking at the vehicle crime figures over time for our area because anecdotally vehicle crime has been falling for a number of years. It will be interesting to see what this research yields.
Where I want to get is a place where individuals pay a fair price for their car insurance based on their own individual driving history rather than as a result of the place that they live. However in an open market like car insurance that seems some way off. So in the mean time we need to challenge the assumptions being made - namely that our insurance price reflects high levels of fraud and crime in the area. This is a large piece of work but I continue work on this and push for measures in Parliament which I believe will help reduce car insurance prices.
Useful publications - last update November 2015
Select Committee Reports
Transport Committee - 4th Report 2011: The cost of motor insurance, March 2011
Volume II, March 2011
Government response to the 4th report, September 2011
Select Committee follow up report 2012: The cost of motor insurance, December 2011
Government response to the follow up report, April 2012
Cost of whiplash 2013, July 2013
Volume II, July 2013
11th Special Report of Session 2013-14 and Further Government Response to Committee's Fourth Report: Cost of Motor Insurance - Whiplash, December 2013
Government response, October 2013
Select Committee 2014 Driving Premiums Down: Fraud and the cost of motor insurance, June 2014
Select Committee 2014: Response by Government and Association of British Insurers, October 2014
Letter from Louise Ellman MP to Chris Grayling MP, 29 October 2013
Letter from the ABI to Louise Ellman MP, 9 August 2013
Letter from Berryman's Solicitors to Louise Ellman MP, 15 August 2012
Letter from CAMPS Solicitors to Louise Ellman MP
Letter from Stephen Evans, Chief Executive of AIS to Louise Ellman MP, 28 October 2014
Letter from Lord Faulks QC Concerning Whiplash Reform, 9 April 2014
Letter from Chris Grayling MP to Louise Ellman MP regarding cost of motor insurance, 12 March 2014
Letter from Louise Ellman MP to Paul Philip, Chief Executive of Solicitors' Regulation Authority, 12 February 2014
Letter from Louise Ellman MP to Chris Grayling MP regarding cost of motor insurance, 12 February 2014
Letter from Louise Ellman MP to the Motor Accidents Solicitors Society regarding the cost of motor insurance, 12 February 2014
Letter from Louise Ellman MP to the Association of British Insurers regarding the cost of motor insurance, 12 February 2014
House of Commons Library publications
Standard note on car insurance costs http://www.parliament.uk/briefing-papers/SN06061/motor-car-insurance
Competition and Markets Authority
Report of the CMA, September 2014
Shabana Mahmood MP has today launched a campaign against spiralling car insurance costs.
"You know only too well that our car insurance costs have got out of control. A 40 year-old man with no previous motoring convictions driving a Vauxhall Corsa round here will pay around £1,100 a year. In Sutton Coldfield he’ll pay £650. At my recent coffee morning, local women complained that these prices were having a terrible effect on the family finances.
"And it’s all because of our postcode; law abiding drivers with no convictions are being ripped off because of their postcode.
"I’m demanding the Government looks at this again. If insurers are going to judge us by our postcode rather than our personal history, then the postcode area they judge should be much larger. Don’t judge Small Heath or Nechells, for example, judge Birmingham or the West Midlands.
"Will you back my campaign to bring car insurance prices down? Please click here to let me know http://www.shabanamahmood.org/civicrm/petition/sign?sid=7"