Car insurers say they are facing a fraud ‘pandemic’

But the industry’s own figures show that claims costs have actually fallen 29% since 2010, landing them a multi-billion pound windfall.

Data produced by the Association of British Insurers (ABI) shows the amount paid out annually by motor insurers fell from £8.3 billion in 2010 to £5.89 billion last year – a decrease of £2.41m.

The figures, available on the ABI website but never highlighted in press releases, contradict recent assertions by industry executives backing government plans to attack access to representation and proper compensation for people injured in road accidents by increasing the small claims limit from £1,000 to £5,000.

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Mark Wilson, chief executive of AVIVA, said in The Times last week the government’s changes would “end the fraud pandemic”, but leading law firm Thompsons Solicitors says fraud is being cynically exaggerated to attack the rights of honest motorists.

Where is the evidence of a fraud pandemic?” said Tom Jones, head of policy at Thompsons Solicitors. “The ABI data shows claims costs have fallen dramatically in the last five years, meaning the major car insurers and their shareholders have had a huge profits and dividends windfall.

“It was only in August that Mark Wilson was telling his shareholders that its general insurance underwriting profit in the first six months of 2015 was its best in eight years.

“AVIVA want to have it both ways – they want us to believe there is a ‘pandemic’ but on the other hand they say they are doing well. They will get away with it for as long as they are allowed to hide their profit breakdown. We say if there is a crisis show us the evidence from your figures so they can be independently verified because the ABI stats suggest your claims don't stack up.

Thompsons Solicitors has been tracking the financial reporting of major car insurers, such as AVIVA, Direct Line and Admiral, closely since publishing its ‘Profiting from motorists’ report in 2013. Its recent findings have been summarised in a new factsheet highlighting how their trading performance does not tally with their scaremongering about ‘fraud’.

Key points include:

  • Direct Line, the market leader, said when announcing its 2014 results that reserve releases of £278.4 million ‘were driven primarily by continued favourable experience on bodily injury claims across recent accident years’.
  • Admiral’s chief operating officer David Stevens said earlier this year that the company had been able to make ‘higher reserve releases’ as a result of ‘positive claims development, in particular from the 2011, 2012 and 2013 years’.
  • Direct Line and Admiral have between them paid out £1.65 billion in dividends in the last three years – £221 per policy holder.
  • AVIVA made an operating profit of £499m in 2014 from UK and Ireland general insurance, which includes motor and home products. The company refuses to divulge separate profit figures for car insurance.

Most of the car insurers are making record profits and seeing their share prices hit records highs, outperforming the rest of the stock market,” added Tom Jones.

Meanwhile, premiums have increased 9.2% in the last year, and motorists are threatened with legal changes that will mean they will either see less compensation because they will have to pay for their lawyer from their damages or they will have to take on insurers on their own if they are unfortunate enough to suffer a road accident.

“On the evidence of the past few years, the government’s legal changes will deliver only one thing – a continued profits bonanza for the car insurers.

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