Labour action to tackle motor premiums criticised for ‘industry-led approach’

The new Labour government has been criticised for favouring an “industry-led approach” as it looks to deliver on its election pledge to tackle car insurance.

Today (16 October 2024), the government said it was launching a new motor insurance taskforce in a bid to drop the price of cover.

It will bring together consumer champions and industry groups, such as the ABI, insurers and insurance regulators.

The move comes after transport secretary Louise Haigh said the FCA and Competition and Markets Authority needed to investigate the sector during Labour’s election campaign.

However, Anthony Hughes, chair and chief executive at the Credit Hire Organisation (CHO), felt it was “odd that the members of the taskforce investigating the high cost of motor insurance includes motor insurers”.

He added: “Labour made clear their intention to look at this issue before the election, so it’s no surprise that the new government has honoured its commitment.

“But if the industry investigates itself, how do you avoid the outcome being skewed?”

And Matthew Maxwell Scott, executive director of the Association of Consumer Support Organisations (Acso), felt Labour’s new plans were not as independent as claimed.

He said: “It is regrettable that the promised CMA/FCA investigation, which would have been properly independent, has been shelved in favour of a largely industry-led approach.

“Why ask the ABI to be at the centre of an investigation into its own members’ pricing behaviour? 

“Given motor insurance is a compulsory product, insurers must be far more transparent on pricing and especially where investment returns are concerned, as well as the profits they make from customers who choose to pay their premiums on a monthly basis.”

Taskforce participation 

While the plans have been criticised, the FCA will be on the government taskforce and aim to identify any actions that may stabilise or reduce motor insurance premiums.

As part of this, it will analyse the causes of increased costs in motor insurance and look closely at claims costs, reviewing claims handling arrangements and factors impacting different types of claims.

Maxwell Scott also stressed that it was important the government was making moves to bring down car insurance premiums and that his firm will look to take part in the process.

“At least the government is doing something and consumer groups such as Acso will seek to participate fully in the process,” he added.

“We also call on the taskforce to explore whether insurance offers good value for money at the point of claim, especially as the data shows shows fewer claims being made, despite rises in road usage post pandemic and accident rates are at similar historic levels.”