It cant go on like this!

An interim report into affordable car insurance

David Ward MP




2



3

Contents

1. Executive Summary ........................................................................................... 4
2. Introduction ........................................................................................................ 5
3. The Motor Insurance Industry .......................................................................... 6
3.1 Market factors ................................................................................................. 8
a) Credit hire companies .............................................................................................. 8
b) European Court of Justice ruling ............................................................................ 8
c) The cost of personal injury claims ......................................................................... 9
d) No win, no fee, referral fees and claims management companies ............... 10
3.2 Crime .......................................................................................................... 13
a) Insurance fraud ....................................................................................................... 13
b) Uninsured drivers ................................................................................................... 13
c) Measures to combat uninsured driving ............................................................... 14
3.3 Young and newly qualified drivers .............................................................. 16
4. The scale of the problem in Bradford ............................................................ 17
4.1 Expert witnesses ....................................................................................... 17
a) The Police ................................................................................................................ 17
b) The Insurance Industry .......................................................................................... 18
c) Doctors ..................................................................................................................... 23
d) Driving Instructors ................................................................................................... 23
4.2 Results of residents survey .................................................................... 24
a) The survey ............................................................................................................... 24
b) Car usage in Bradford ............................................................................................ 24
c) Car insurance premiums in Bradford ................................................................... 25
d) Causes of high premiums ..................................................................................... 26
e) Suggested remedial action ................................................................................... 27
f) Impact on Drivers ................................................................................................... 28
g) Summary .................................................................................................................. 29
4.3 Local case studies .................................................................................... 29
a) Thematic analysis ................................................................................................... 29
b) Case study quotes .................................................................................................. 30
5. Summary and next steps ................................................................................ 32
4


1. Executive Summary

1. Average car insurance premiums in Bradford are among the highest in the
country and increases have been consistently higher than in other parts of the
UK. This is a problem faced by people of all ages and backgrounds, living in all
parts of the city although it does clearly affect some post codes more severely
than others.

2. Responses to our survey clearly show that these huge increases are having an
unacceptable impact on Bradford residents and businesses and that urgent
action must be taken to bring costs down.

3. The causes of recent increases are broadly similar to those in other parts of the
UK, with the increasing cost of personal injury claims playing a leading role, and
fraud, uninsured driving and credit hire costs also making significant
contributions.

4. Our research indicates that the exceptionally high cost of car insurance in
Bradford relative to other areas is caused by several local factors, in particular:
High levels of car insurance fraud. Bradford has one of the highest levels of
cash for crash type insurance fraud in the country
High incidence of uninsured drivers. Some areas of Bradford have some of
the highest level of uninsured drivers of any area in the UK.
Exceptionally high levels of personal injury claims driven by a very high
number of claims management companies.

5. A number of specific suggestions for tackling rising car insurance costs have
arisen from our research which we believe merit serious consideration by the
Government. These include:
Proceeding with measures to bring down the cost of no win no fee cases
Regulating the credit hire industry to tackle excessive costs
Banning the payment of referral fees
Setting up a self-funded specialist police unit to target uninsured drivers
Introducing stiffer penalties for failing to purchase insurance
Introducing windscreen insurance disks
Adjusting the evidence requirements for making a whiplash claim
Supporting the rising use of driver information systems for younger motorists
but on a strictly voluntary basis with tighter controls on how data can be
collected and used
Strongly resisting the European Court of Justices ruling that gender cannot
be taken into account in insurance underwriting
Proceeding with the proposal to expand the scope of online portal for personal
injury claims

6. We will be carrying out further research into these proposals and seeking high
level Ministerial meetings to discuss our findings.
5

2. Introduction

While the issue of rising car insurance premiums is acknowledged to be matter of
concern across the country, this report and supporting survey work was prompted by
the level of complaints received by the office of David Ward, MP for Bradford East. It
was quickly identified as an issue of major significance to people across the whole
Constituency and the view was quickly taken by the Constituency Campaign Team
that it cant go on like this.

Dramatic rises in the cost of car insurance have received a great deal of media
attention over the past 12 months, and have been the subject of a recent inquiry by a
Parliamentary Select Committee. The Government have already responded with
some new measures aimed to bring down the cost of insurance, but it remains to be
seen whether these will be radical enough to have an impact on a situation which is
clearly unsustainable.

The report examines how recent increases in premiums have affected peoples lives
across all parts of Bradford. It will also look at what factors are to blame for the
particularly high level of car insurance premiums in the city and consider what future
steps might be taken to bring premiums down. In order to gather evidence we have
conducted interviews with key individuals, and invited expert groups to make written
submissions. This has been accompanied by an extensive survey of Bradford
residents.






6

3. The Motor Insurance Industry

Car insurance to cover third party damage and injury is compulsory throughout
Europe under European motor insurance legislation. However, comprehensive cover
represents the largest proportion of the market, and our report deals primarily with
this.

The past decade has seen big rises in car insurance premiums across the whole of
the UK. The AA British Insurance Premium Index shows that the lowest three quotes
from 90 providers (Shoparound average) has almost doubled since 2007 (Figure
1), and that this rising trend has accelerated over recent years. In the year to April
2010 the Index shows a rise of 40.1%, to an average annual premium of 892.



Figure 1 (Source: AA British Insurance Premium index
1
)

The Index also shows that 17-22 year olds have seen the biggest percentage rises
although their premiums did fall slightly in the first quarter of 2011, to around 2,493.
Clearly, this level of premium puts car insurance beyond the reach of many young
people.

In Bradford the picture is even worse both in terms of the level of cost of insurance
and the rate at which premiums have increased. According to the consultants
Towers Watson, Bradford has had the highest rate of increase in comprehensive car
insurance premiums since they started their Insurance Price Index in 1997, with
premiums currently increasing at a rate of 13% every three months.

Underlying these huge increases are two years of heavy losses for the car insurance
industry. FSA returns show that in 2010 motor insurers lost 20p on each 1 of

1
http://www.theaa.com/services/insuranceandfinance/insuranceindex/index.html
7

premium sold, and suffered similar losses in 2009
2
. This suggests that unless
something is done to deal with the causes of the escalating costs faced by insurance
companies, then further increases in premiums are likely as the industry seeks to
return to profit.

The industry reports that the recession has reduced investment returns insurance
companies can expect to receive on any premiums earned
3
. The emergence of price
comparison sites has made the industry intensely competitive and reduced the
margins that insurers make on their products. Increased European capital adequacy
requirements, which mean that insurance companies cannot invest as much as they
were able to in the past may also have played a role more recently.

However, insurers have been clear that it is the rising cost of personal injury claims
which has played the biggest role in pushing up the premiums that they need to
charge. Other factors have also played a role, in particular credit hire costs,
insurance fraud, and the cost of accidents involving uninsured drivers.

While the combination of factors pushing up insurance costs in Bradford is broadly
similar to other parts of the UK, this report finds that some of these are unusually
acute in the city. The result is premiums which are exceptionally high. In an area
where average incomes are relatively low, this means that car insurance is, for an
increasing number of Bradford residents, unaffordable.

In this section we review the available evidence on the factors responsible for driving
up the cost of car insurance for Bradford motorists, and for young motorists in
particular. We also examine some of the action which is already being taken to
remedy this situation.



2
ABI market analysis 2010
3
BIBA evidence to The Cost of Motor Insurance, Transport Select Committee HC 2010-11 Ev69 para
2.5
8

3.1 Market factors
a) Credit hire companies
Credit hire firms are a rapidly growing component of the insurance claims industry
4
.
These companies offer their clients replacement cars on credit, while their own
vehicles are being repaired following an accident. The cost can then be claimed from
the at-fault insurer.

Because the customer who hires the replacement car is not the one ultimately
paying the bill, the cost is often significantly inflated. Lloyds Market Association
research
5
found that credit hires are usually five days longer than insurer arranged
hires, and on average the cost is 2.4 times higher. The at-fault insurer is not involved
in the rental agreement and so has no way of controlling the cost to ensure that the
length of the hire and the type of vehicle are reasonable.

Claims and accident management companies will usually make a percentage on
arranging credit hire vehicles, incentivising them to maximise the value of the hire
agreement. Frequently accident management services are offered by credit hire
companies themselves. Often, the same businesses that organise and profit from
credit hire will also organise the repair of the damaged vehicle. This gives them a
perverse incentive to delay the repair for as long as possible in order to maximise
income from credit hire agreements.

We were contacted by Ford who are attempting to bring costs down by introducing
their own accident management model. Ford have recently introduced an accident
management service for their customers which offers replacement vehicles at cost
price, plus a fixed admin fee, so there is no incentive to prolong the hire period for
longer than necessary.

There is currently no specific regulatory regime for accident management companies
or credit hire companies although costs have been bought down through the
General Terms of Agreement (GTA) protocol, jointly agreed with insurance
companies (see section 3.1 b).

b) European Court of Justice ruling
In March 2011, the European Court of Justice ruled that the use of gender in
insurance underwriting constituted discrimination. This ruling will come into effect in
December 2011.

Average premiums for men are higher than those for women, but the gap is greatest
for younger women drivers who pay around half as much. According to the latest AA
British Insurance Price Index the Shoparound average for those aged 17 to 22 is
now 2,872, while the average for women in the same age group is just 1,671
6
.

The consequence of the ruling will be that premiums for women drivers are likely to
increase: the ABI predicted that premiums for women drivers under 25 could

4
Lloyds Market Association member suggests that the number of cases involving a credit hire
company increased by 69% in the 18 months to September 2010, cited in The Cost of Motor
Insurance, Transport Select Committee HC 2010-11 Ev47 paragraph 2.8
5
Ibid
6
http://www.theaa.com/services/insuranceandfinance/insuranceindex/
9

increase by as much as 25%
7
. Data from the AA Insurance Index
8
suggests that
insurers are already increasing their prices for women in anticipation of the ruling
coming into effect.

c) The cost of personal injury claims
Insurance industry groups and a recent report by Parliaments Transport Select
Committee have identified the rising cost of personal injury claims as the leading
factor in driving up insurance premiums. A major industry working party on the issue
has found that the cost of injury claims from road traffic accidents is increasing at
around 30% each year. They found that around a third of this increase can be
attributed to the higher number of claims and the remainder to the higher average
cost of settling claims.

Despite the fall in the number of road traffic accidents, the number of personal injury
claims has risen by over 70% over the last ten years, and the proportion of accidents
involving third party injury claims is now approaching 25%
9
. In Bradford the figure is
close to 38%, giving the city among the highest level of personal injury claims in the
UK
10
. Moreover, research by the Institute and Faculty of Actuaries shows that the
number of claims in Yorkshire has been increasing at a faster rate than other areas
in recent years
11
.

A large proportion of the increase in the number of claims has been made up by
whiplash injuries. ABI research has found that around two thirds of motor insurance
personal injury claims arise from whiplash injuries
12
- twice the European average -
and 20% of every motor insurance premium is paid out against whiplash claims
13
.

The main evidence required in order to make a claim is a doctors note, and our
discussions with GPs revealed that there is no physiological test for whiplash
injuries, meaning that doctors may find it difficult to refute phony cases. So far, the
Government has refused to consider increasing the evidential requirements for
whiplash on the basis that it may mean that genuine claims go uncompensated
14
.

The evidence collected for our enquiry suggests that people are being incentivised to
make personal injury claims by aggressive marketing practices pursued by personal
injury lawyers, and the low risk of pursuing a case under no win, no fee
arrangements.


7
ABI research cited in ABI press release
http://www.abi.org.uk/Media/Releases/2011/03/European_Court_of_Justice_gender_ban_is_disappoi
nting_news_for_UK_insurance_customers_says_the_ABI_1.aspx
8
http://www.theaa.com/services/insuranceandfinance/insuranceindex/index.html
9
Ratio of third party injury claims to third party damage claims cited in David Brown, Report from the
Third Party Motor Working Party into motor insurance claims costs June 2011
http://www.actuaries.org.uk/sites/all/files/documents/pdf/third-party-working-group-june-2011.pdf
10
Email from Karl Murphy, Institute and Faculty of Actuaries
11
Presentation by David Brown and Karl Murphy Institute and Faculty of Actuaries,
http://www.actuaries.org.uk/sites/all/files/documents/pdf/workshop-c4-david-brown-karl-murphy.pdf
12
Tackling Whiplash, Prevention, Care Compensation, ABI 2008
http://www.abi.org.uk/Publications/Tackling_Whiplash_Prevention_Care_Compensation1.aspx
13
Ibid
14
House of Commons Debate, 12 July 2011, c251W
10

d) No win, no fee, referral fees and claims management companies
Evidence gathered for our enquiry suggests that no win, no fee legal arrangements
have played a significant part in encouraging people to make personal injury claims.
As a whole the system has also driven up legal costs and dramatically increased the
cost of claims paid out by insurance companies, which has been passed on to
motorists through higher premiums.

No win, no fee, or Conditional Fee Arrangements (CFAs), were introduced through
the Access to Justice Act 1999 to replace legal aid for personal injury cases and to
maintain access to justice. CFAs allow the winning party to recover their legal fees
from the losing party (before this point they were recovered from the clients
damages). As an incentive for solicitors to take on cases on this basis, the winning
solicitor is able to charge a success fee on top of normal fees (up to 100% for
injuries resulting from car accidents) which is also recovered from the losing party.

This system makes less risky cases highly lucrative for personal injury lawyers, and
has greatly added to costs for the losing party. The ABI have estimated that around
10% of motor insurance premiums now pay for the legal costs, and the average cost
associated with a claim (2,100) is almost as great as the average amount paid to
the claimant (2,300)
15
. This huge cost has meant that insurance companies will now
prefer to settle without going to court, even if their chances of success are good,
because the risk of losing is so high
16
.

In addition, it has led to the adoption of very aggressive marketing practices by
personal injury lawyers, most notably the payment of referral fees in return for
business. Since 2004, insurers, credit hire firms, vehicle repairers, rescue truck
drivers, claims and accident management companies, law firms, and medical
experts
17
have been able to receive and be paid fees that average between 200
and 1000 per referral
18
. The fees provide a strong incentive for the organisations
receiving them to pursue potential claimants and to encourage them to make claims.

The referral fees system has led to the rapid growth of the claims management
industry, which markets advice to people wishing to make a claim and then refers
them on to solicitors in return for payments. A geographical analysis of the density of
claims management companies carried out by Karl Murphy at the Institute and
Faculty of Actuaries suggests a link between high premiums in Bradford and the very
high number of claims management companies operating in the West Yorkshire
region.

Figure 3 below shows that the Leeds/Sheffield area is second only to Manchester/
Merseyside for the number of claims management companies per head of
population, with almost ten times more than the South West, and eight times more
than Wales and the South. Figure 4 and Figure 5 depict the geographical spread of
claims management companies and of recent rises in insurance premiums,

15
ABI Research, cited in The Cost of Motor Insurance, Transport Select Committee HC 2010-11 591
Ev51 paragraph 3.7
16
Review of Civil Litigation Costs Final Report, December 2009
http://www.judiciary.gov.uk/Resources/JCO/Documents/Reports/jackson-final-report-140110.pdf
17
LSCP p15
18
Ibid, para. 1.3
11

respectively. Comparing these maps shows a clear geographic correlation between
the number of claims management companies and rising premiums. However, it is
uncertain whether the number of claims management companies is a cause of effect
of high levels of personal injury claims. According to the Ministry of Justice the
Bradford District has 85 claims management companies which they said was high.
























0.00
0.05
0.10
0.15
0.20
0.25
0.30
M
a
n
c
h
e
s
t
e
r

/

M
e
r
s
e
y
s
i
d
e
L
e
e
d
s

/

S
h
e
f
f
i
e
l
d
M
i
d
l
a
n
d
s

-

W
e
s
t
N
o
r
t
h

W
e
s
t
M
i
d
l
a
n
d
s
-

N
o
r
t
h
L
o
n
d
o
n

-

O
u
t
e
r
L
o
n
d
o
n

-

I
n
n
e
r
S
o
u
t
h

C
e
n
t
r
a
l
N
o
r
t
h
W
a
l
e
s


-

S
o
u
t
h
M
i
d
l
a
n
d
s

-

N
o
r
t
h
N
o
r
t
h

E
a
s
t
W
a
l
e
s

-

S
o
u
t
h
S
o
u
t
h

E
a
s
t
M
i
d
l
a
n
d
s

-

E
a
s
t
W
e
s
t
E
a
s
t
S
o
u
t
h
W
a
l
e
s

-

C
e
n
t
r
a
l

&

N
o
r
t
h
S
o
u
t
h

W
e
s
t
Figure 4 Change in private car
premium (source: Institute and
Faculty of Actuaries)
Figure 5 Claims management
company density (source:
Institute and Faculty of Actuaries)
Figure 3 Claims management company density by postcode (source: Institute and
Faculty of Actuaries)
12

There have been a number of attempts to reduce the cost of personal injury claims
over recent years. Companies which accept referral fees, including claims
management companies, have been regulated by the Ministry of Justice since 2007,
forcing them to sign up to a code of conduct which prevents cold calling limits their
use of high pressure sales tactics. However a number of companies continue to
employ very aggressive marketing practices in order to solicit claims, including
unsolicited emails and text messages and leafleting in city centres. There have been
calls for further regulation, notably from a Government review on compensation
culture, led by Lord Young
19
.

In an effort to reduce legal costs, an online portal (the RTA PI Scheme) was
introduced in 2010 for processing road traffic accident claims valued between 1,000
and 10,000. There have been a number of calls for this to be extended to higher
value claims and the Ministry of Justice has recently consulted on increasing the
threshold to either 25,000 or 50,000 which would cover 90 or 95% of claims
respectively
20
.

The Government commissioned a review into legal costs led by Lord Justice
Jackson
21
which recommended that success fees should no longer be recoverable,
and instead should come out of the clients damages. This will be implemented
through the Governments Legal Aid, Sentencing and Punishment of Offenders Bill,
currently at Committee Stage in the House of Commons.

The insurance industry
22
and Lord Jacksons Report have also called for a ban on
referral fees. The Government have said they are sympathetic to this idea
23
but
have yet to bring forward measures to do it and the proposal was not included in the
Legal Aid, Sentencing and Punishment of Offenders Bill.

Some organisations have taken unilateral action to refuse referral fees, including the
insurer AXA and Ford Accident Management. However, under the current system
this puts them at a competitive disadvantage to rival companies who continue to
accept fees.

19
Common Sense Common Safety: A report by Lord Young of Graffham to the Prime Minister
following a Whitehallwide review of the operation of health and safety laws and the growth of the
compensation culture, HM Government October 2010
20
Ministry of Justice Solving disputes in the country courts 29 March 2011
21
Review of Civil Litigation Costs Final Report, December 2009
22
ABI press release, April 2011
23
House of Lords Debate, 7 July 2011, c349
13

3.2 Crime
a) Insurance fraud
Research by the consultancy Towers Watson suggests that insurance fraud costs
insurers 1.9 billion per year, adding 44 to the cost of the average premium
24
and
making fraud one of the main factors in pushing up premiums. The ABI report says
that insurance fraud is on the rise, increasing by 30% since 2007.

Insurance fraud is dominated by claims for personal injuries and ranges from
opportunistic claims for factitious or exaggerated injuries to the most serious cash
for crash scams, involving staged accidents and often organised by criminal gangs.
Clearly, the lack of verifiable physiological evidence for whiplash injuries (see
above) makes this an easy route for fraudulent insurance claims of all types.

Bradford is one of the worst areas of the country for organised insurance fraud. The
Insurance Fraud Bureau (IFB) has estimated that there were 30,000 staged collision
(cash for crash) claims in 2009 and rank Bradford as having the 5
th
highest level of
cash for crash insurance fraud in the country
25
. Interviews with Bradford Police
suggested that it is difficult for them to detect instances of insurance fraud.

Because insurance fraud has not been a priority for the police the Government have
agreed to set up a specialist police unit, funded by the insurance industry, to help
crack down on this kind of crime
26
. This will be similar to the Dedicated Cheque and
Plastic Card Unit (DCPCU) which is funded by the UK payments industry. The unit
will receive 9 million from ABI members to fund 35 specialist fraud detectives and
police support staff for the next three years.

On May 10 2011 the Transport Minister, Mike Penning, announced that a scheme
would be developed to allow motorists to voluntarily allow insurers to check their
details on the DVLA in order to reduce deliberate and accidental insurance fraud
27
.
This would allow the insurer to check the accuracy of information provided about
their age, points on their licence and whether or not they are the main driver of the
vehicle, at the time when the insurance is being purchased
28
. The Department said
that the implementation of the project would take 18-24 months from May 2011.

b) Uninsured drivers
Driving without valid insurance is illegal in the UK under section 143(1) of the Road
Traffic Act. However the Government have estimated that around 4% of vehicles on
the road are being driven without insurance; the highest level in Europe
29
. This is a
problem which is particularly acute in Bradford: this year the MIB have identified the
BD3 postcode as the area with the highest number of uninsured drivers in the UK for

24
http://www.towerswatson.com/assets/pdf/2940/TW-EU-2010-118031.pdf
25
http://www.insurancefraudbureau.org/files/press_release_pdfs/ifb_postcode_crash_for_cash_hot_sp
ots_release__trade_final__05.11.10_pdf.pdf
26
Home Office press release http://www.homeoffice.gov.uk/agencies-public-bodies/nfa/news/fraud-
news/police-and-insurance-join-forces/
27
The Cost of Motor Insurance, Transport Select Committee HC 2010-11 Q264
28
Ibid
29
CIE Evidence Base, DfT, paragraph 9
14

the 13
th
consecutive year, with nearly seven times more uninsured drivers than the
national average
30
.

Uninsured driving poses a huge cost to the insurance industry because companies
are liable for damage caused by uninsured drivers, and also lose income as a result
of premiums which are not collected. This cost is passed on to law-abiding motorists
through higher premiums. This is compounded by the fact that uninsured drivers are
reportedly five times more likely to be involved in a crash. The MIB have estimated
that the combined cost to insurers of uninsured driving is over 500 million per
annum, which equates to about 30 per premium.

A comprehensive insurance policy covers motorists for damage caused to their
vehicle by uninsured drivers and the Road Traffic Act also places obligations on
insurance companies to pay compensation in certain other instances where the
driver is uninsured
31
.

Under the Uninsured and Untraced Drivers Agreement between Motor Insurers
Bureau and the Department for Transport, the industry also pays compensation for
injuries caused by uninsured drivers. The Agreement obliges them to satisfy a
judgement in the event that the at-fault party is unable to pay, but in practice, legal
costs mean that it is cheaper for the MIB to pay out compensation before claims go
to court. In 2009 the MIB paid compensation to 30,000 claimants where the third
party to a collision event proved to be uninsured. This is funded through a levy on
insurers which has increased from 39.2 million in 1992 to almost 400 million in
2010.


c) Measures to combat uninsured driving
The current penalty for driving uninsured is a fine of up to 5000, 6 to 8 penalty
points and a period of disqualification. Current sentencing guidelines state that an
appropriate penalty would be a band C fine, equivalent to 150% of weekly
disposable income, 6 penalty points and a 12 month disqualification
32
. In Bradford a
sample of cases suggested that average fines are currently around 370; far below
the UK average insurance premium of 892. There is no requirement for drivers
convicted to pay backdated insurance costs for the time that they were uninsured.

The Police also have the option of applying a fixed penalty of 200 and 6 points on a
driving licence. Additionally uninsured vehicles can be seized, until a valid insurance
certificate is produced, along with a 150 charge.

The Transport Minister, Mike Penning, has said that the Government recognise
there is a strong case for better correspondence between penalties and the cost of
purchasing insurance
33
. However the Government have said that they have no
current plans to increase the level of fines or fixed penalties for driving whilst

30
http://www.mib.org.uk/NR/rdonlyres/E675DE3F-C26F-415B-8B4F-
1C85D47D8C42/0/Hotspots_national_release_2010_FINAL.pdf
31
For example where a car is insured, but being driven by a driver who is not named on the policy,
the insurance company would be liable for any damage caused by that driver.
32
Magistrates Court Sentencing Guidelines, Sentencing Guidelines Council, May 2008
33
HC Deb, 30 June 2011, c933W
15

uninsured, although under the Strategic Framework for Road Safety
34
published in
May 2011 they have said that would look at increasing the level of fixed penalties for
motoring offences more generally.

In early 2011, the Government introduced a new offence of being the registered
keeper of a vehicle without insurance (unless it is registered as off-road). In order to
enforce this, the Government have developed the Continuous Insurance
Enforcement scheme. Under the scheme:

The DVLAs list of registered keepers of vehicles will be compared with the
Motor Insurance Database run by the MIB.
The uninsured vehicle keeper will be sent a warning letter
Vehicle-keepers will be fined 100 if they fail to insure the vehicle
If the vehicle remains uninsured then it can be seized and destroyed.

The Department for Transport estimate that this should eliminate 15-20%
35
of
uninsured drivers. This builds on Automatic Number Plate Recognition (APNR)
technology, which has been permitted since 2006. This allows police to check the
number plates of vehicles being driven against the MIBs database in order to detect
uninsured drivers. This is in use in the ring of steel in Bradford, made up of 80
cameras across the district.





34
Strategic Framework for Road Safety, Department for Transport , May 2011
35
House of Commons Debate, 11 May 2011, Column 448WH
16

3.3 Young and newly qualified drivers

As noted above, young drivers face dramatically higher premiums than older drivers
and recent increases have disproportionately affected them. The high cost of
insurance faced by younger drivers is largely a consequence of the high risk that
they pose. The AA estimates that a driver under 21 is ten times more likely to have
an accident than a driver over 35
36
.

It is indicative of this risk that a large number of insurers seem to be withdrawing
from this market altogether. A recent study by Which? found that only seven of thirty
insurers they contacted would quote for an 18 year old male driving a 1.4 litre
saloon.

Solutions to this problem have involved both trying to improve the standard of driving
among young drivers, and improving the information that is available to insurers
about individuals driving habits and ability. In the first category the New Drivers Act
of 1995 introduced a batch of measures including the revocation of licences for new
drivers who accumulate six penalty points and the introduction of the theory test in
1996.

The ABI have published detailed research on reducing the risks for young drivers
which made a number of further suggestions
37
, including a minimum of one year
learning period and limiting the number of passengers that a young person is able to
carry. However, the Department for Transport have said that they are against more
regulation for young drivers, which they say would pose a risk of perverse
consequences for example, limiting the carriage of young passengers would
prevent a sober driver providing transport for companions who have been consuming
alcohol.
38


A voluntary measure developed in 1995 with the intention of improving matters for
newly qualified drivers was Pass Plus. This scheme consists of six modules, which
are assessed on a continual basis without a test at the end. Driving Instructors we
interviewed said that Pass Plus was not an effective measure for reducing accidents
and an Insurance Broker confirmed that no significant discounts are available for
young people in Bradford completing a Pass Plus course. Research from the Driving
Standards Agency
39
confirms that Pass Plus has been an ineffective predictor of
accident risk.

Insurers are developing new products which offer discounts if young drivers choose
enhanced training before and/or after the test, or are happy to accept in return
restrictions such as not driving at night. There is also increasing use of voluntary
driver information systems which can provide information on an individuals
behaviour and casualty risks, although these do pose questions about the civil
liberties of the individual whose data is being collected.


36
Young Drivers: Road Safety and The Cost of Motoring, ABI
http://www.larsoa.org.uk/larsoa_archive/pdfs/Young_drivers_report.pdf
37
Ibid
38
The Cost of Motor Insurance, Transport Select Committee HC 2010-11 Ev74
39
Research, The Driving Standards Agency
17

4. The scale of the problem in Bradford

Section three looks specifically at the impact and causes of rising car insurance
premiums in Bradford through a series of face-to-face and telephone interviews with
experts in this field. In some cases respondents preferred to send us written
submissions. It also includes the results of a residents survey providing an insight
into the experiences and views of local residents, along with a thematic analysis of
casework received on this issue.

4.1 Expert witnesses
a) The Police

We interviewed Inspector Dorian James about the dedicated Road Policing Unit, for
which he has overall responsibility. The unit includes 32 officers plus 2 sergeants.
The service provided is very expensive, not only because of the direct staffing costs
but because of the training required and the cost of the technology needed to carry
out their duties.

Driving whilst uninsured is one of many road offences for which the Unit is currently
responsible, along with speeding, car theft, non-use of seat belts and use of mobile
phones whilst driving. The Unit is also used for wider policing duties when additional
operational support is required.

Ins. James raised the low cost of fines relative to the cost of insuring a vehicle and
suggested that this meant that fines were an insufficient deterrent. Later written
evidence from the Police suggests that a typical fine in Bradford was only around
370, far below the cost of insurance premiums.

We were told that the Police make frequent use of powers to impose 200 fixed
penalties and to seize vehicles, charging a recovery fee of 150 to return the vehicle
once insurance has been obtained. Written evidence from the Police states that
1,169 vehicles were seized in the first six months of this year; equivalent to around 6
each day.

However Ins. James said that the Police time involved in this action is significant as
the law requires interviewing of the owner of a vehicle before that vehicle can be
seized. Ins. James told us that this area of work was not highlighted as a priority and
the police receive no specific funding to carry it out.

Ins. James explained the process by which the well-known Ring of Steel can be
used to identify uninsured vehicles using Automatic Number Plate Recognition
(ANPR) technology. In 2009 this was extended from 22 cameras in the city centre to
over 80 cameras throughout the District. Ins. James told us about a successful
operation carried out in December 2009 in which nearly 1,500 vehicles were stopped
and 101 were seized. However Ins. James again highlighted the extensive resources
which were required for such an operation.

Ins. James written evidence proposes a range of stiffer penalties that could be
introduced for uninsured drivers. These include increasing the level of fixed-penalty
notices and forcing uninsured motorists to pay back-dated insurance costs. He also
18

proposes that fines could be returned to the Police to fund a self-sustaining specialist
unit to target uninsured driving, though acknowledged that there would be opposition
to this.

On the subject of accidents involving personal injury it was confirmed by Ins. James
that it was not an offence to fail to report the accident to the police. His written
evidence suggests that even when injuries are not detected by a motorist until after
an accident, the accident should still be reported to the Police . A general discussion
on the subject of personal injury claim fraud revealed the difficulty in the police being
able to detect the crime and in fact Ins. James could only recall one example of a
successful conviction.


b) The Insurance Industry
The Association of British Insurers
We interviewed the ABIs Policy Advisor, Rob Cummings, and the ABI also sent us
their submission to the recent Transport Select Committee inquiry on the cost of
motor insurance.

The ABI said that they were aware of the high cost of insurance in Bradford. Their
view is that the factors which are causing insurers to put up their premiums in
Bradford are similar to factors working on a national level. They ranked the top three
factors as being the compensation system (and the cost of personal injury claims
specifically), insurance fraud, and uninsured drivers. On a more local level they said
that the level of vehicle crime in an area could also play a role but that generally
advances in vehicle security had bought this down.

On the subject of the compensation system they said that the legal costs of
processing personal injury claims had risen significantly to the extent that legal costs
are as much as 87p for each 1 paid out in claims. They said that this was due to
high fixed costs charged by personal injury lawyers which were significantly greater
than the equivalent fees paid in other countries. They said that the recently
developed RTA PI scheme had been successful in reducing costs, bringing down the
average legal cost from around 2000 to around 1,200. However, they emphasised
that this was significantly higher than other EU countries, giving the example of
Germany where legal costs are around 200-300. They also expressed concern
that the portal may have made it more attractive to make claims by simplifying the
process.

ABI said that they regretted that a ban on referral fees had not been included in the
Legal Aid, Sentencing and Punishment of Offenders Bill, although they
acknowledged that this would be difficult to implement a ban effectively, and that an
amendment adding a ban to the Bill would need to be carefully drafted. They also
said that referral fees were a symptom rather than a cause of the problem, in that the
high legal fees charged by personal injury lawyers made it profitable for them to pay
substantial amounts for new business, and that what was ultimately needed were
further measures to control fixed costs. They gave the example of Ireland where
recent reforms have significantly reduced costs. We agreed to meet with them in the
autumn to discuss issues relating to the Bill further.

19

They highlighted the strong correlation between claims management companies and
the number of personal injury claims which we mention above. They said that credit
hire was a significant issue, but that costs were starting to be controlled in the last
12-18 months through market solutions particularly through Insurance Companies
General Terms of Agreement protocol with credit hire companies which defines the
level of cost that an insurer will pay for the hire of a car.

The ABI acknowledged that information sharing between insurance companies was
a relevant issue and said that they were trying to address this using the Claims
Underwriting Exchange (CUE) system which allows information about individual
drivers claims history to be shared among insurers, and through the forthcoming
system to allow them to search the DVLA database mentioned above.
On the issue of younger drivers they explained that the higher premiums they face
are purely a reflection of their increased risk of being involved in an accident and the
higher average value of the associated claims. They said that the reason why
premiums had increased at a faster rate for younger drivers was that they were
disproportionately affected by the rising number of personal injury claims, because
they tended to make claims of higher value.

They recommended that greater conditions be placed on driving licences for younger
drivers including a minimum 1 year learning period and a limit on the number of
passengers that they are able to carry. They also highlighted the measures that were
being taken to reduce premiums through tracking devices which had the benefit of
both incentivising better driving, and enabling insurers to reward more responsible
drivers with lower premiums.

A local insurance broker
An Interview with a local insurance broker demonstrated the surprising range of
quotes on the market for motorists in all parts of Bradford. In practice some
companies offered quotes four to five times higher than another for exactly the same
category of driver in the same area. This demonstrated that it was well worth
motorists shopping around to find the lowest quote but did not help to explain why
even the lowest quoting companies were often requiring premiums that were
increasing at a frightening rate.

The broker produced sample quotes for 18 and 56 year old drivers in six areas of
Bradford, which are summarised in Figures 6 to 8 below. These demonstrate the
high variation in premiums across the district, and the wide spread of quotes which
are available from different companies. It also highlights the extreme level of quotes
which are currently on offer for younger drivers, which are in all but one case in the
tens of thousands. It is also notable that only one company was prepared to quote
for the 18 year old driver in each area.

Evidence of the steep rise in premiums was also provided, as well as evidence of
further rises to come in future months. He said that there were no significant
discounts available for young motorists who complete Pass Plus modules,
confirming the view that this measure has failed in bringing down premiums.

It was the brokers clear view that while the cost of uninsured drivers had remained
roughly similar over recent years it was the rising cost of personal injury claims that
20


















































21

has been responsible for the majority of the increase in premiums. When discussing
personal injury claims the broker said that in many instances insurance companies
were paying out on such claims without challenging them at all because it was
cheaper, at 3,000-6,000 a time, to pay out than to challenge and incur the
attendant legal fees.


Figure 7 - Lowest quote for 18 year old driver in selected Bradford postcodes


Figure 8 - Lowest quote for 56 year old driver in selected Bradford postcodes

0
5,000
10,000
15,000
20,000
25,000
30,000
BD2 BD3 BD4 BD5 BD10 BD23
Lowest quote for 18 year old driver in selected Bradford
postcodes
0
200
400
600
800
1,000
BD2 BD3 BD4 BD5 BD10 BD23
Lowest quote for 56 year old driver in selected Bradford
postcodes
22


Ford Accident Management
Ford contacted us about a model of accident management they have developed for
their customers which should help to eliminate unnecessary hire costs and reduce
unjustified personal injury claims while still representing a viable business model.

Ford reported that the average cost of a claim made through an claims management
company was 4,583, of which only 1,100 was spent on repairs, while the
remaining 3,483 was made up of personal injury compensation and credit hire
costs. The companies generated their income through earning a percentage on
credit hire arrangements and from referral fees paid by personal injury lawyers. Ford
claim that this has resulted in the average claims manager asking a customer 6-7
times if they would like to make a personal injury claim.

Fords model, which they began operating on the 4
th
July, offers replacement
vehicles at cost, plus a fixed admin fee (82.50), so there is no incentive to prolong
the hire period for longer than necessary. They report that of the 32 customers they
had put into hire cars the average duration of hire was just 5 days compared to the
average claims management rental of around 19 days.

Ford do not accept referral fees, but do ask their customers if they are injured
following an accident as part of their duty of care. They report that this has resulted
in very low numbers of customers making personal injury claims: only one customer
out of a total of 79 at the time of writing.

Repairs are organised at authorised Ford repairers using genuine Ford parts, in
return for a 10% referral fee. This model is viable through the repairer referral fee,
and the admin fee for replacement vehicles, as well as the increased business
generated for Ford repairers and increased sales of Ford parts.


The Co-operative Insurance
The Co-operative Insurance contacted us about new insurance products that they
are offering for younger drivers which allow them to reduce premiums over time
given evidence of responsible driving behaviours collected via driver information
systems.

This involves data being transmitted via satellite technology from a smartbox fitted
into the policyholders car. This monitors a drivers behaviour and, subject to
evidence of responsible driving behaviours, would result in a Safer Driving
Discount.

The Co-operative referred to a particular case that was covered in the Telegraph and
Argus in which a young driver was given an insurance quote 3,000 below the next
lowest quote if he agreed to use the new innovation. Tellingly the Co-operative
acknowledge even their quote was still a significant premium and that:
Unfortunately, the premium reflects our claims experience in parts of Bradford, with
high levels of personal injury claims and fraud

23

In addition the Co-operative made some valuable comments about the general issue
of high premiums and in particular the increasing and unwelcome obtrusiveness of
the claims management sector which it believed was contributing heavily to
spiralling claims and increases in premiums. The Co-operative suggested that
tougher penalties should be introduced for firms engaged in encouraging claimants
to falsify claims and was very critical of the practice of cold-calling potential
claimants.

Specific suggestions for reducing claims costs and premiums were offered by the
Co-operative including, carrying out a consumer-led review, the introduction of Legal
Expense Insurance cover as standard, publication of invoice costs to be compared to
standard commercial rates, and banning the selling-on of claims books to third party
firms without the consent of policyholders.

c) Doctors
We interviewed a local GP about the subject of whiplash injuries (see page 10). The
GP confirmed that he had seen an increase in the number of patients presenting with
neck pain following road traffic accidents, and had been increasingly contacted by
insurers seeking confirmation of injuries for which compensation was being claimed.

The GP highlighted the fact that the diagnosis of soft tissue injuries resulting from
whiplash relies on self-reported symptoms from patients, and there is no objective
physiological test of which he was aware that such injuries were genuine. The GP
said that it is not a GPs role to try to refute or undermine a patients account of their
own symptoms, but that he would try to discourage patients from exaggerating their
severity as this was in their own medical interests.

When asked how evidential requirements for claiming compensation for whiplash
might be strengthened he repeated that this would not be part of a GPs role.
However, he did believe that it may be possible for insurance companies to limit the
circumstances under which a whiplash injury could be compensated, but that this
would require a change in the law.

For example, he said that it might be possible to define a minimum speed of collision
which could result in a whiplash injury for which compensation could be claimed.
Alternatively, he suggested that responsibility for the proper adjustment of headrests
could be transferred to the claimant, such that if they could not make a claim for a
whiplash injury unless the headrest was properly adjusted.

d) Driving Instructors
In response to calls for evidence we were contacted by Advanced Driving Instructors
who both expressed their sympathy with young drivers who, on successfully passing
their driving test, found themselves with premium quotes of several thousand pounds
to insure their first vehicles in most cases the quotes were several times the value
of the vehicles being insured.

One of the instructors was of the view that improved training after the driving test for
newly qualified drivers would help to reduce premiums but was quite dismissive of
the Pass Plus programme and labelled it a complete failure. They felt that Pass
Plus was of minimal benefit in reducing the risk of accidents and that this was
24

reflected in the unwillingness of insurers to give any significant discount for drivers
who have completed the course. They suggested that while typical discounts once
exceeded 700, they are now around 150-200 less than the cost of Pass Plus
tuition.

Perhaps the most significant thing to emerge from the interviews was the story told
by one of the instructors who after expressing what appeared to be genuine
sympathy with the unaffordable level of premiums his young clients faced went on to
reveal that he himself had been involved in an accident a couple of years ago.

At 8am on the morning after the accident had occurred he received a telephone call
from a solicitor who had been sold the instructors personal details by his own
insurance company. The solicitor then acted on behalf of the instructor and the
learner driver who was driving at the time of the accident. The instructor ended up
receiving 2,500 for personal injury plus 3000 for vehicle repairs whilst the learner
received 2,500 for personal injuries.


4.2 Results of residents survey
a) The survey
The survey was open to Bradford residents and was available online via David
Wards website from the 14th of July. In addition a number of paper surveys were
distributed in the Bradford East constituency with a freepost return address. At the
time the analysis was carried out there had been 511 valid responses. Since that
time we have received almost double that number.

b) Car usage in Bradford
In this section of the survey, respondents were asked to indicate whether or not they
used their cars for recreation, commuting or business. Respondents were able to
select more than one option.

Do you use your
car for...?
% of
respondents
Recreation 75%
Commuting 42%
Business 18%
Figure 9 Car use in Bradford

The results show that car insurance costs have the potential to adversely impact on
prosperity and economic growth in the region, which is particularly worrying in view
of the struggle to overcome the effects of the recent recession and subsequent low
growth.

The growing cost of car insurance may make commuting such a financial burden,
especially when combined with high fuel costs, that people may be forced to
compete for already scarce jobs nearer to home instead, or give up their businesses
altogether if these rely heavily on transportation. One respondent commented that he
had in fact already found himself in such circumstances as the insurance on his van
increased from 1,200 to 4,300 last year, putting him out of business.

25

Figure 11 Increase in average car
insurance rates among respondents
2009-11

Given the majority of respondents indicated they used their cars for recreational
purposes, the escalating costs of car insurance clearly also have the potential to
have a significant impact on quality of life for Bradford residents, should they be
forced to give up their cars as a result.

c) Car insurance premiums in Bradford
In this section, respondents were asked to record how much they had paid for their
car insurance in the previous two years, and how much they were paying this year.
Not every respondent was able to record a figure for each year, but there were
enough responses to produce an average figure for each year. Outliers were
discarded to avoid biasing the data. The tables and graph below show the average
annual amount of car insurance paid by survey respondents over a three year
period, and how this has changed in percentage terms.








Naturally this information does not reflect the range of some individuals experiences
which are affected by a number of factors such as age, gender, type of car and
claims history. While some respondents had consistently paid premiums as low as
200, others had to pay up to 4,700 to insure their vehicles. Moreover, some
respondents actually saw their prices for insurance fall - one respondents fell by
65%, while at the other extreme another respondents car insurance costs increased
by a staggering 339%, from 342 in 2009 to 1,500 this year.

These variations notwithstanding, the general trend of a steep increase is clearly
evident. This increase far exceeds both the rate of inflation for these years and the
average national increase in car insurance prices. It should be noted that, because
indexes which track national trends in insurance prices tend to use average quoted
premiums (or the lowest three quotes as in the case of the AA Index cited above),
they are not directly comparable with the premiums which people have actually paid.
500
600
700
800
900
1,000
2009 2010 2011
Average annual car insurance in
Bradford
Year
Average annual car
insurance in Bradford
2009 551.62
2010 665.17
2011 897.19
% Increase year-on-year
% Increase 2009-10 20.6
% Increase 2010-11 34.9
% Increase 2009-11 62.6
Figure 10 Average car insurance
rates among respondents 2009-11

Figure 12 Average car insurance rates
among respondents 2009-11(trendline)
26

This real terms escalation in costs hits peoples disposable income, and this is
particularly difficult in times of economic hardship.

d) Causes of high premiums
In this section of the survey, respondents were asked to rank what they felt were the
most significant causes of high insurance premiums in Bradford on a scale of 1 to 7.
The number of times each factor was included in the top three factors was then
counted to produce the following graph:


Figure 13 Suggested causes of high car insurance prices in Bradford by respondents

Respondents put forward the prevalence of uninsured drivers in Bradford as the
main cause of the present situation. A commonly held view was that the lack of
financial and/or legal sanctions for uninsured drivers was in effect incentivising
driving without insurance, with respondents typically claiming that it was mainly the
lack of action against uninsured drivers, as it was cheaper to not bother [getting
insurance] due to low fines if caught, that there were not enough convictions for
uninsured drivers.

Fraudulent claims were also identified as being heavily responsible, tied to the
growing culture and prevalence of no win no fee litigation. Respondents noted that
under this system people were encouraged to make exaggerated or even completely
fictitious claims without incurring any personal costs. One respondent claimed so-
called cash for crash scams were being organised on a large scale in order to
fraudulently gain compensation. This was backed up by the personal experience of
another respondent who offered his service as a witness following a minor accident,
only to wish he had not bothered after he was contacted by a number of insurance
and compensation companies trying to claim inflated compensation for injuries and
damage that did not occur.
0
10
20
30
40
50
60
70
80
90
Uninsured
Drivers
Fraudulent
Claims
No Win
No Fee
Companies
Greedy
Insurance
Companies
Lack of
Police
Action
Referral
Fees
Inflation
Suggested Causes
27


A significant number of respondents also blamed greedy insurance companies,
which suggests a widespread mistrust of the motor insurance industry as a whole,
despite its lack of profitability in recent years. However, other organisations such as
claims management companies have done very well out of the existing
arrangements, and their unscrupulous behaviour has undoubtedly fed mistrust in the
claims industry as a whole.


e) Suggested remedial action
In this section, respondents were presented with a number of suggested remedial
measures which could help to bring down car insurance prices in Bradford. As before
respondents were asked to rank these in order of which ones they considered would
be most effective, and the number of times each factor was included in the top three
factors was then counted to produce the following graph:


Figure 14 Suggested solutions to high car insurance prices in Bradford by respondents

By far the most popular option was to impose tougher sanctions on uninsured
drivers, which is unsurprising as most respondents identified this as the primary
cause of the escalating costs in the previous section. The additional comments
section reflected the anger felt towards uninsured drivers, with a significant number
of comments that uninsured drivers vehicles should be automatically scrapped, and
one person even suggesting this should be made into a public spectacle!

More resources for policing was identified as the second most popular course of
action suggesting most people didnt blame the police for the present situation but
recognised that due to the pressure on resources, they were unable to tackle the
problem effectively.
0
10
20
30
40
50
60
70
80
90
Suggested Solutions
28


Banning no win, no fee claims and referral fees also proved popular, suggesting
there would be strong support for tackling both the no win, no fee culture which has
driven up the costs of car insurance in the UK as a whole, and likewise for the
banning of the payment of referral fees. The finding is particularly notable as
personal injury lawyers have argued that referral fees merely represent a form of
marketing which is in consumers interests. Similarly, a recent report by the Legal
Services Board argued that there was a lack of public support for a ban
40
. Our
survey suggests that in fact public support for such a measure would be strong.

Another popular suggestion was the introduction of mandatory insurance discs in car
windscreens, which is currently the case for Vehicle Excise Duty. Finding a workable
solution may be complicated by the fact that presently the requirement to have
insurance falls not only on the vehicle but also individual drivers, but this is certainly
an option which merits further investigation.

The lack of support for greater competition in the market is likely to reflect
recognition that with a multitude of providers, the car insurance market is already
competitive and other factors account for the current situation. Finally, the lack of
support for measures targeted at young drivers such as monitoring devices, raising
the driving age limit or introducing tougher driving tests suggests most respondents
do not support further regulation of young drivers, which may impact negatively on
even on those who drive responsibly. Likewise, there is no widespread support for
monitoring devices for young drivers, which has been suggested as a possible
course of action.

f) Impact on Drivers
The final section of the survey was directed at people who do not currently drive, and
asked if they were likely to start driving in the next few years, and what, if any,
impact the high costs of car insurance would have on their decision.

Nearly all respondents said that the cost of motor insurance would have an impact
on their decision as to whether or not to drive in the next few years, and the vast
majority said that it would have a serious impact. This was the case for all ages of
driver, whether or not they said that they were intending to drive, or were considering
doing so.


40
Referral Arrangements, Legal Services Consumer Panel, May 2010 chapter 9
29


Figure 15 Impact of high car insurance on respondents decision to drive in the next
few years

This pattern was even more starkly evident for young drivers; every single
respondent under the age of 24 indicated that the high cost of insurance was going
to have either some impact or a serious impact on their decision on whether or not to
start driving in the next few years.

g) Summary
In conclusion, the survey of Bradford residents highlighted growing concerns about
the high costs of car insurance in the city, and in certain postcodes in particular. It
was clearly demonstrated that if unchecked, the spiralling costs of car insurance had
the potential to adversely impact on peoples quality of life in general, their job
prospects and in some cases the viability of their businesses. In just three years, the
average annual cost of car insurance for respondents rose from around 550 in 2009
to just under 900, an increase of 63%.

Respondents identified the high number of uninsured drivers on the roads, as well as
the increase in fraudulent claims, which in turn was facilitated by the no win no fee
litigation culture and the practice of referral fees. As such, it was unsurprising to see
that the suggested remedial actions focused heavily on these root causes; namely
introducing tougher sanctions against uninsured drivers, furnishing police with the
appropriate resources to intercept uninsured drivers in the first place as well as
introducing reforms to the legal system that would restrict the practice of no win no
fee litigation, and cracking down on the practice of referral fees.

4.3 Local case studies
a) Thematic analysis
A thematic analysis of casework regarding car insurance received by David Ward
MP revealed the most common complaint was that people with extensive driving
experience, who had never had an accident and who had never made a claim
against their insurance company, who were nonetheless facing steep increases in
the amount they were being charged for car insurance.

An especially strong sense of resentment was felt by people who argued that they
were being discriminated against purely on the basis of where they lived, claiming
No Impact
Some Impact
Serious Impact
Impact of high car insurance on decision to
start driving in the next few years

30

that some insurance companies were refusing to even consider providing them with
a quote, or quoting a prohibitively expensive sum. Meanwhile, they knew that if they
lived in another part of the city or the region, in some cases literally only several
streets away, they could get significantly cheaper insurance. One respondent even
said she was considering moving away from Bradford as it was putting her
relationship with her boyfriend under strain, as he would not be able to afford to get
his car insured were he to move in with her.

Another common complaint was that young people, even those who had passed
their test had no realistic prospect of getting affordable insurance, leaving them
angry and frustrated.

Other respondents detailed their personal experiences of many of the issues outlined
earlier in the report. For instance, one respondent described how upon complaining
to a taxi driver about the cost of his insurance, the taxi driver proposed arranging a
staged accident involving one his friends and in order to submit a fraudulent claim, in
return for which the respondent would receive 2,000. Asking if the taxi driver had
previously participated in such cash for crash scams, he was informed that it was
big business in Bradford.

Another respondent described how after he had had his car vandalised and
contacted his insurance provider about it, he was subsequently bombarded by calls
from personal claims solicitors and companies. He suspected that his insurance
company had passed on his details to them, something which he felt they had no
right to do.

b) Case study quotes

G.W. (BD18): I was speaking to a taxi driver about the high cost of car insurance
when he said: let me arrange for my friend to crash into you or the other way
around, and we will pay you 2000, plus 500 per passenger in the car, and he
proceed to break down the costs and payments like it was a business he was
running. I asked Have you done this before? to which he replied Yes its big
business in Bradford.

A.D. (BD3): I have held a clean and valid driving licence for over 8 years but
recently I was quoted 2,200 for a 1 litre engine Nissan Micra which was only valued
at 110!

D.S. (BD4): I was told on more than one occasion by insurance companies that they
could not give me a quote for my 17-year old son because we lived in the BD4 area.
After passing his test, the cheapest quote we could find was 9,500, to be paid in
full.

D.B. (BD3): 1500 for insuring a Ford Fiesta driven by a school teacher in her
fifties, with no points on her licence, no claims bonus and which is kept on our drive.

A.A. (BD16): I have been bombarded by personal claims solicitors and companies
after my car was vandalised. I suspect the initial insurance company passed my
details to these people, something I feel they had no right to do.
31


L.G (BD7): I am a college student and I was over the moon when I passed my
driving test after a couple of attempts. I immediately went online to check insurance
prices only to be quoted 53,000 for an old Corsa! After an exhaustive search, the
cheapest quote I found was for 5,000. I also was told over the phone by someone
working for an insurance company that they did not insure people in my area (BD7),
and then they put the phone down on me. I am upset and angry that even after
passing my test, I am unable to drive.

J.M. (BD8): My premium has steadily increased despite my vehicle falling in value,
me becoming a more experienced and thereby safer driver and my no claims bonus
increasing. I find it difficult to believe that rather than focusing on my "risky
postcode", insurance companies are unable to assess each individual policy based
on the policyholders history.

A.T.: My boyfriend and I cannot live together as he cannot afford to get his car
insured at my address in Bradford. I am seriously considering renting my house out
and moving to a cheaper postcode which would be a shame as I moved to Bradford
in the first place because it was cheaper and because I like the city.

A.H. (BD3): I am 46 years of age, have been driving for in excess of 24 years and
have never claimed in my life. This year my premium has increased from 553 to
807, a ridiculous increase of 46%.Quotes from other insurers were in excess of
1,000 while Esure said they were not providing insurance to anyone in my area.
C.W. (BD9): My premium is 864 but is due to go up because someone else
crashed into me! Oh, and I checked what my premium would be in BD15 (456) and
in KA7 which is where my grandparents live in Ayr (174!). In fact, try as I might, I
couldn't get a premium in Ayr that was as high as 864.

32

5. Summary and next steps

Rising car insurance has affected all parts of the UK, but our research suggests that
few areas have been worse affected than Bradford over recent years. Average car
insurance premiums in Bradford are among the highest in the country and increases
have been consistently higher in Bradford than in other parts of the UK.

This problem is faced by people of all ages and backgrounds, living in all parts of the
city, although some postcodes are particularly badly affected. Responses to our
survey clearly show that these huge increases are having an unacceptable impact
on Bradford residents and businesses and that urgent action must be taken to bring
costs down.

The Liberal Democrat Team in Bradford East is determined to bring about a
reduction in premiums in the area and this report is the first stage in the team
gathering information and developing a fuller understanding of what is clearly a
complex issue.

The report reveals that there are numerous contributory factors leading to
unacceptably high insurance premiums in Bradford, notably:
High levels of insurance fraud. Bradford has one of the highest level of cash
for crash insurance fraud in the country
Uninsured driving. Bradford has among the highest number of uninsured
vehicles in the UK
Exceptionally high levels of personal injury claims driven by a very high
number of claims management companies

It is evident that there will be no one, single solution to this problem but we believe,
on the basis of our findings, that there is strong evidence for considering the
following actions:
Proceeding with measures to bring down the cost of no win no fee cases
Regulating the credit hire industry to tackle excessive costs
Banning the payment of referral fees
Setting up a self-funded specialist police unit to target uninsured drivers
Introducing stiffer penalties for failing to purchase insurance
Introducing windscreen insurance disks
Adjusting the evidence requirements for making a whiplash claim
Supporting the rising use of driver information systems for younger motorists
but on a strictly voluntary basis with tighter controls on how data can be
collected and used
Strongly resisting the European Court of Justices ruling that gender cannot
be taken into account in insurance underwriting
Proceeding with the proposal to expand the scope of online portal for personal
injury claims

We will be carrying out further research into these proposals and seeking high level
ministerial meetings to discuss our findings. Some of the changes required may
involve work in and through Parliament and we are committed to working with others
to bring about the legislative changes that may be needed.
33


However, we are convinced that - with or without Government support - we can
develop a local strategy to tackle some of the factors that make the problem of
unacceptably high premiums particularly worrying for the residents of Bradford East.
This local strategy will require a partnership approach involving ourselves, local
Councillors, the Police, the Youth Service, local schools, insurance companies and
brokers, General Practitioners, Driving Instructors, Personal Injury Lawyers and
many others.

We are extremely grateful to all of the Bradford residents who took the time to fill in
our survey and to those who responded to our call for written evidence. Their input
has been extremely valuable and will allow us to make a strong case for action over
the coming months. We would also like to thank all those who gave up their time to
take part in interviews, which were invaluable in helping us to gain a greater
understanding of this issue.