What are they, who is involved and what is happening?
What is the taskforce?
On Wednesday 16th October, the Department for Transport (DfT) and His Majesty’s Treasury (HMT) jointly convened the Motor Insurance Taskforce. This taskforce (details of which can be read here) aims to ‘root out factors that increase costs for the car insurance industry’. It follows Labour’s pre-election manifesto commitment to tackle the cost of car insurance.
In essence, the taskforce is aiming to bring down the cost of claims for insurers. Because the premiums of the many pay the claims of the few, the idea is that by reducing the cost of claims you can bring down premiums for consumers.
This is the principle at the heart of our 10-Point Roadmap, which we released in February this year. It outlines a range of factors impacting claims costs and what we can collectively do to tackle them.
We pulled together this roadmap in response to rising premiums. In 2023, compared to the year previous, premiums increased 25%. There is more on the reasons behind this on our insurance pricing FAQs page.
This increase has since slowed and the last quarterly premium tracker for Q2 (April, May and June) 2024 showed premiums had fallen by 2%. But tackling costs is still important.
Who is involved?
The taskforce is jointly led by Transport Secretary Lousie Haigh and Economic Secretary to the Treasury, Tulip Siddiq. The taskforce also includes other departments such as the Ministry of Justice and Department for Education, plus the regulatory bodies the Financial Conduct Authority (FCA) and Competition and Markets Authority (CMA).
The role of the FCA in the taskforce is not to be confused with its Market Study into Premium Finance. For the taskforce, the FCA has said it will analyse the causes of increased costs in motor insurance and will look closely at claims costs, reviewing claims handling arrangements and factors impacting different types of claim. The regulator will also analyse the impact of rising insurance prices on different customer groups (e.g. younger drivers).
The taskforce will also consult with a stakeholder panel made up of other involved organisations. This includes us (the ABI), plus consumer groups Citizens Advice, Which? and comparison website Compare the Market. There are also other trade bodies representing insurance brokers (British Insurance Brokers Association) and motor manufacturers (The Society of Motor Manufacturers and Traders).
What is the plan?
The taskforce is yet to publish its Terms of Reference (more details on its mission and process) but we’re expecting this soon. We also know that the taskforce wants to complete all work within 18 months, which would mean conclusion around Spring 2026.
There is also a further meeting of the Taskforce planned for January 2025.
While this is happening, we will be progressing with our own plans too. Specifically, we are working on research that explores possible policy levers government could pull, and what the likely cost and impact of these changes would be.
What is the FCA Market Study and how is it connected to the Motor Insurance Taskforce?
The FCA Premium Finance Market Study is a separate initiative to the Motor Insurance Taskforce but was announced on the day the Taskforce took place and is related because one of the regulators on the Taskforce (the FCA) is leading this study.
But while the taskforce has a more general remit, the FCA Market Study is specifically focused on premium finance, which is when insurers or brokers charge customers for paying for their annual premium on a monthly basis, rather than all at once. It also relates to home insurance as well as motor insurance.
Charging for pay-monthly has been criticised by consumer groups and regulators, who say that it more severely impacts poorer customers, who cannot afford to pay all in one go. However, it is important that customers continue to have the option to spread payments and providing this service comes at a cost to the insurer.
Earlier this year, we published our Premium Finance Principles, outlining that charges should be made completely clear to consumers and be reasonable, relative to the cost incurred by the insurer for providing the option. Since then, some studies (including this one) suggest that average rates for pay-monthly have started to come down.
The Market Study will use data from firms and other sources to conclude whether the FCA believes that people paying monthly for home and motor insurance are receiving fair, competitive deals.
There is more detail on this study in the FCA’s Terms of Reference.