Money Talks

The big fuel debate: Will the 1p rise go ahead or not?

Confused.com reporter Lois Avery talks petrol prices and the petition which could make the chancellor do a u-turn.

Running a car is now more expensive than ever, add to that a jump in the cost of rail travel and there’s no doubt we’re all feeling the pinch.

My train ticket, which covers my 40 mile commute to work, shot up by just over £20 a month on 1 January and my short journey to and from the train station is now costing more thanks to the latest jump in fuel prices.

What’s going on with fuel prices?

The recent VAT rise and fuel duty increase hit petrol prices hard, pushing a litre of unleaded up to an all time high of £1.30 meaning Britain now has the second highest fuel prices in Europe.

To make matters worse, fuel duty is set to rise by another 1p in April – a decision made by Labour chancellor Alistair Darling before the election last year.

But following mounting pressure from the public, the media and government opposition, chancellor George Osborne may make a u-turn on this, despite the fact it would deprive the Treasury of £500m a year at a time when public finances are stretched to the limit.

But why is it that petrol price hikes seem to grab the public’s attention more than other tax rises?

The VAT rise has pushed prices up on other day to day items but it feels minimal and  drip feeds in so we don’t feel too hard done by, a penny here, a few pence there unless you’re buying something big.

Perhaps it’s because every time you use your vehicle you’re reminded by your falling fuel gauge that you’ll have to fill up sooner.. Each journey costs you slightly more than you’re used to. And the more you have to spend on fuel, the less you have to spend on other things.

 So will the government scrap the planned 1p rise?

Osborne hinted during a BBC radio interview this week (27 Jan) that the government could potentially ‘override’ the 1p rise ahead of the 23 March Budget. There’s also the ongoing whisper of a fuel stabiliser, which would help protect motorists at the pump against the fluctuating price of oil.

But the Treasury is keeping tight lipped, saying that all taxes are under review and no announcement will be made ahead of the Budget.

But in the meantime, the Great British Public is taking a stand in light of the possibility and Confused.com has also waded in to throw its weight behind the protest.

We’ve joined forces with The Sun newspaper in the fight against rising fuel costs –find out more about the campaign which is calling on George Osborne to freeze petrol tax. We’ll be revealing more about this in our next newsletter, so keep an eye out for what we’ve got in store.

Are you feeling the effect of pricy petrol and diesel? Let us know how much more the proposed hike will cost you. Tweet me @confusedlois or email lois.avery@confused.com.

Why your car insurance is costing you more

You may remember back in November we reported on the government’s inquiry into the rising cost of car insurance.

Confused.com’s very own head of motor insurance, Will Thomas, gave evidence to the committee, which grilled several insurance industry representatives on the reasons for the dramatic rise in car insurance premiums over the last year.

Well, last week, the Transport Select Committee met again, this time to hear more evidence from a panel that included representatives from the police, the Association of Personal Injury Lawyers, the Claims Management Industry and the Transport Secretary, Mike Penning.

So if you want to know why your car is now more expensive to insure, read on.

 

Uninsured drivers

Fraud was a big discussion topic at this inquiry, just as it was at the first one and uninsured drivers were blamed for adding £30 to the annual cost of every motor insurance policy. Speaking at the inquiry, chief superintendent Geraint Anwyl, of the Association of Chief Police Officers' roads policing section said car insurance fraud has become "highly organised and very profitable."  He estimated that there are 1 million uninsured drivers on Britain’s roads today, which insured drivers are paying for.

Staged accidents and “crash for cash” claims are now blamed for a 50 per cent rise in the number of cases insurers are investigating.

But Anwyl admitted that police forces and the Crown Prosecution Service did not have the money or resources to prosecute small-scale fraud cases and suggested that insurance companies fund dedicated insurance fraud teams within the police to help them bring these cases to court.

The problem is so rife that a new Continuous Insurance Enforcement law, which was incidentally announced on the day of this hearing, is now in place. It means all vehicles have to be insured, even if they’re not driven.

Personal Injury Claims - access to justice and the compensation culture

The committee heard that, at the moment, all that a claimant needs in order to make a compensation claim is basic medical confirmation reporting that they have suffered in some way relating to the incident.  And it seems it’s difficult and expensive for insurers to disprove, resulting in escalating payouts.

All you have to do is switch the T.V on and you’re bombarded with no-win, no-fee adverts and companies offering to help to fight your cause, even if the accident happened years ago. I’ve even had texts offering to get me compensation – and I haven’t had an accident!

According to David Powell, from Lloyds Market Association (LMA), which submitted evidence to the committee, the difficulty is clamping down on fraudulent cases without harming those with legitimate claims.

But the argument that personal injury claims were responsible for pushing up car insurance costs was rebuked by a representative from the Association of Personal Injury Lawyers (APIL), who said that tougher restrictions would deny people their access to justice.

APIL say that the legal spend remains at 30 per cent of the cost of a claim, on average, and has remained static for much of the last decade and that the cost of claims has not increased but the number of claims has. As a result, insurers' costs have been pushed up by at least 30 per cent a year.

Transport minister, Mike Penning said the culture needs correcting: “The sheer culture we have in the UK that we seem to have inherited from America, is frightening.

"We are going to be in a situation like in America if we are not careful, where you get lawyers turning up at road traffic accidents."

Road safety

With the number of car insurance claims soaring, the discussion fell on  the issue of road safety and driver training.

Witnesses agreed that re-educating drivers was at the heart of the solution to keep accidents down, therefore reducing claims and, in turn, lowering motor insurance premiums across the board.

Penning said it was wrong that new drivers were let loose on the UK’s roads with no motorway experience and Tony Baker, director general of the Credit Hire Organisation, said that in order to manage prices the industry had to get to grips with risk first.

This was also something Confused.com heavily supported at the last meeting when we made calls for the government to step in and legislate where possible, in order to reduce the risks posed by inexperienced drivers.

Ambulance chasers

The committee was keen to hear how claims management companies could be affecting insurance costs and heard evidence from Laurence Beck, managing director of Accident Advice Helpline. Firms like this contact you when you’ve had an accident and pass your details on to a solicitor for a no-win no-fee representation deal.

This fee is then passed on to the insurer if the claimant wins.

Beck argued that the referral process was just a marketing tool to drive business and was such a small fraction of the claim cost that it wasn’t significant.

Credit Hire

The credit-hire industry was also scrutinised for their part in escalating claims costs for insurers.

Credit hire firms offer replacement vehicles to motorists whose vehicles have been damaged in an accident. The cost of this vehicle is then passed on to the other party’s insurer. The LMA explained that this creates significantly inflated costs for insurers, and can add as much as £600 on to the cost of a claims case.

Price-comparison sites

The sharp rise in car insurance prices over recent months was blamed on the insurance market “correcting” itself after a period of artificially low prices but price-comparison websites also came under fire.  They were blamed for introducing too much competition into an already fiercely competitive market.

The committee also heard how those customers who renewed their policy every year with the same insurer are the most profitable customers for the provider. But these profitable customers, who haven’t moved or shopped around in the past, are now moving because price-comparison sites are offering them much cheaper alternatives.

Access to DVLA records

During the hearing Penning revealed that the government was looking at giving insurers greater access to motorists’ driving records so they could accurately assess  driver’s points and convictions before they insure them.

This is a move to stamp out fraud, both intentional and unintentional. So whether it’s a driver deliberately concealing points on an insurance policy, or a driver who forgets to declare them, both invalidate policies and add to the uninsured driver problem.

The solution, which could roll out within six months, will allow insurers access to DVLA information that will automatically notify them of any penalty points or convictions. Drivers can opt out but this will obviously greatly reduce their chances of getting insured.

When questioned on tougher penalties for uninsured drivers Penning argued that car crashing was a bigger deterrent.

So that’s the debate summed up, now tell us what you think.

If you want to read more see how fraud is hitting the cost of insurance and read more on the big car insurance debate.

Let us know your thoughts and stories by commenting below or emailing them to lois.avery@confused.com.