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From fraud to supply chain issues, we offer our international experts’ predictions on the opportunities and challenges that the motor insurance market may face in the coming year and beyond.

Motor predictions
#1 Highway Code changes will filter through to claims market

The wide-ranging changes made to the Highway Code have now been in place for nearly a year, and we predict that liability disputes involving those changes will soon begin to filter into the claims market. Insurers need to be mindful of claims referring to the changes, particularly where the wording of the rules may be interpreted flexibly to suit the viewpoint of those bringing claims. The introduction of the ‘hierarchy of road users’ was not intended to be a charter for strict liability, as reinforced by the stated need for all road users to behave responsibly. However, the consequences for claims of the lack of adequate communication of the changes to the Code at the time of release, specifically those on the positioning of cyclists and priority for pedestrians at junctions, will only become apparent in time. There will be those who look to take advantage of any confusion on these issues. 

#2 Usage and behaviour based pricing will make further inroads

As consumers look to generate savings on their outgoings during the cost of living crisis, behaviour based insurance products, such as motor, are likely to generate increased business. While publicity around policies involving telematics data has often focused on younger and ‘unsafe’ drivers, more people may now be prepared to re-evaluate these policies given the prospect of reduced premiums and additional discounts. Beyond ‘pay how you drive’ policies, other types of coverage, such as ‘pay-per-mile’, may find a new audience. The mass adoption of remote working caused by the pandemic has been maintained to a significant extent, and usage based coverage may prove to be attractive to drivers who no longer contend with the daily commute five days a week.

#3 Clarity expected on mixed injuries

We will see overdue clarity on how mixed injuries, comprising a tariffed whiplash injury and one or more other injuries, should be valued. Recent decisions from district judges have been based on the Court of Appeal’s guidance in Sadler v Filipiak. Pre-dating the statutory tariff for whiplash injuries, this approach involves the courts valuing the additional injuries as they would a free-standing injury, adding that sum to the tariff sum and then ‘standing back’ to consider any potential overlap and reducing the overall figure as necessary. The decisions were well received by claimants, but they are significantly higher than insurers and defendant representatives believe appropriate. Certain claims were expedited as test cases for this novel point of law and, at the time of writing, have now been heard before the Court of Appeal. DAC Beachcroft is instructed on behalf of the Association of British Insurers and the insurers in these test cases. 

#4 Fraud will be an unwanted but expected consequence of the economic crisis

As the cost of living crisis continues to worsen, we will continue to see increased volumes of claims fraud in all UK jurisdictions. It is well understood and documented that economic downturn and recession directly correlate with an increase in fraud. Non injury claims or ‘bent metal’ fraud will continue to rise as claimants seek to avoid the Official Injury Claims Portal altogether. Credit hire fraud remains an attractive option for more unscrupulous credit hire organisations, accident management companies and their associated companies. As one of the few remaining cost bearing areas, opportunities to exploit the economic climate, compounded by the opportunity to recover lost revenue experienced as a direct result of the impact of the whiplash reforms, create a perfect cocktail for growth of claims with a fraudulent element.

#5 Compulsory mediation will be used to clear litigation backlogs

Efforts will need to be made to reduce the unprecedented backlogs seen in the civil courts. From April to June 2022, the average time for a small claim to reach a final hearing was 51 weeks, 14 weeks longer than pre-pandemic. At the forefront of any approach to ease these backlogs will be the recently concluded consultation proposing compulsory mediation on all litigated claims in the small claims track. The consultation asked for views on numerous points including what should be exempt and how the process can work in practice. The response from the Ministry of Justice is awaited, as well as implementation details. While the exact detail of what the service will look like is unclear, the intention is not. 

#6 Supply chain issues and inflation will drive up repair costs and insurance premiums

The year ahead will bring no respite for insurers and policyholders as supply chain issues and inflation continue to bite. The cost of car insurance increased 12.8% in the 12 months to August 2022, with UK average motor premiums standing at £832. Motor claims inflation is expected to accelerate further in the coming months. There is no indication that third party damage inflation will fall below 13% in 2023, especially considering the recent increase in Auto Body Professionals rates, which will have an impact on average repair costs claimed. This will be compounded by expected increases in accident frequency over the next 6 to 12 months. Traffic volumes also have increased significantly during 2022 and driving standards appear to have reduced compared with those pre-pandemic. 

#7 Transport infrastructure and legislation will remain obstacles

Vehicles equipped with automated lane keeping systems (ALKS) are expected to become available in the UK market by 2024, and the government has repeatedly indicated that it plans on classifying ALKS as automated driving for the purposes of the Automated and Electric Vehicles Act 2018. Without adequate updating of the road network infrastructure, including clear lane and intersection demarcation, ALKS will have difficulty functioning properly and safely on all motorways and dual carriageways. Additionally, the government has stated that further primary and secondary legislation is needed to ensure the safe introduction of automated vehicles. The government has already scrapped the Transport Bill mentioned in the last Queen’s Speech and has indicated that a more focused future transport bill will be put before parliament. Realistically, however, there will not be time for a new bill before late 2023. 

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