On 16 October, a little after its first 100 days in office, the government set up a taskforce to examine factors contributing to increases in premiums seen in the motor insurance market over the last couple of years or so.

The government’s press release - in the names of Transport and Treasury Ministers - refers to a 21% increase on average over this period, which is said to be higher than that in  comparable countries in Europe. The FCA provided the 21% figure and on the same day the regulator announced a related review – or, more formally, a competition market study – of the premium finance market for motor and home insurance customers.

The new taskforce will also “agree short-term and long-term actions for [government] departments that can contribute to stabilising or reducing premiums”. Both the government’s press release and the Secretary of State’s statement to Parliament refer to the importance of ensuring that specific groups, such as ethnic minorities, lower income families, and elderly and younger drivers can access affordable motor insurance.

“Car insurance is an essential, not a luxury. It is vital to accessing economic opportunities and this government is committed to getting costs under control. That’s why we’re taking direct action to bring insurance companies and regulators round the table to discuss how we can crack down on spiralling costs.” - Transport Secretary, Louise Haigh, Government press release.*

The detailed remit, activities, timetable and outputs of the taskforce aren’t yet clear. That said, several conclusions might be drawn from the development:

• First and foremost, it represents the first step in delivering the manifesto commitment to address the costs of motor insurance. The timing, a little after 100 days of the new administration, points to the government taking this seriously.
• Second is that the title ‘taskforce’ indicates that this will be time-limited activity and not a more permanent regulatory feature.
• Third is that the reference to specific groups needing to access fair and affordable cover suggests that any solutions could include matters such as graduated licences for younger drivers and technology-based solutions for driver behaviours. And the reference to ethnic minorities accessing the market speaks to concerns aired by the Lord Chancellor** when she was an opposition MP.

Setting up the taskforce is both a clear statement of intent from the government and significant development for those operating in UK motor insurance sector. At this early stage, first impressions are that it feels less aggressive and less interventionist than some in the market might have feared. Whether that turns out to be so in the longer run is likely to depend on the industry’s engagement with the taskforce, particularly on the provision of clear data and evidenced-based analysis of the factors that have driven rising costs across the market.

*Quote taken from Ministers bring together industry experts and consumer champions to tackle spiralling costs for drivers - GOV.UK (www.gov.uk)

** Footnote: The Lord Chancellor has an important decision to make in the next three months on the personal injury discount rate, which we are monitoring closely. Personal Injury Discount Rate | Clyde & Co : Clyde & Co (clydeco.com). While the outcome of that will have an effect on the cost of certain high values claims and therefore premiums, it should be remembered that this is not a factor she can take into account when making her decision under the terms of relevant legislation.