Significant progress has been achieved through the 2020 Action Plan for Insurance Reform, including the introduction of the Personal Injuries Guidelines, legal reforms to rebalance the duty of care, and the establishment of the Office to Promote Competition in the Insurance Market (OPCIM).
A key focus of the reform agenda was addressing personal injury costs, which historically accounted for around 70% of overall motor insurance claims costs. Thanks to the introduction of the Personal Injuries Guidelines and related reforms, that figure has now moved to 46%. However, the last few years has seen the emergence of inflationary pressures. This rise is driven by a combination of external factors, including increased vehicle technology, supply chain disruptions, and a tightening labour market; all of which have raised the cost of repairs.
The Government is firmly committed to delivering further action to drive down insurance costs impacting consumers, with the publication of a new Action Plan for Insurance Reform on 24th July. It sets out a comprehensive set of targeted measures to further improve affordability, availability, and transparency across the insurance sector. As part of the Action Plan, a transparency code for the insurance industry is under development. The Code will require insurers to provide simple, understandable explanations of how premiums are formed and what broader factors influence pricing.
Similarly, the work of the Office to Promote Competition in the Insurance Market has been instrumental in restoring insurance availability in sectors that previously struggled, such as equestrian activities, inflatable hire, adventure tourism, childcare, and high-footfall SMEs like pubs and hospitality. In addition, feedback from insurance stakeholders has indicated that more capacity is entering the market and certain insurance rates are reducing. This is an indication that the Government’s reform agenda is having an impact.
Fostering a more open and competitive insurance market, and ensuring that all consumers benefit from increased capacity, better pricing, and greater choice across all types of insurance, remains a key priority for this Government.
