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Uninsured car drivers – accidents rise

Crashes up due to premium pain

29 August 2017

The Motor Insurers' Bureau has reported a rise in collisions involving uninsured drivers.1 This trend follows the doubling of Insurance Premium Tax to 12% in just 18 months, and a sharp drop in the discount (or Ogden) rate which governs pay-outs for car crash injuries.

The AA says that the rise is deeply depressing but was entirely predictable and avoidable. Mike Lloyd, below, comments on the factors that have contributed to the increase in accidents with uninsured car drivers.


For many years the discount rate was set at plus 2.5%, but in March this year it was reduced to minus 0.75%. This significantly increased the amounts insurance companies have to pay out, which in turn increases car insurance premiums. The discount rate is based on returns from government bonds and was overdue for review, but it was slashed by a much larger margin than expected.

The increase in compensation applied immediately to payouts, which can run to millions of pounds for very serious injuries. Many insurers found themselves facing financial losses because of the much larger reserves needed to meet future claims. As a result, car insurance premiums increased sharply to close that gap.

Michael Lloyd, director of AA Insurance, says: "Because young drivers are responsible for the greatest number and highest cost of injury claims, their premiums have taken the brunt of the rises.

"Over the second quarter of 2017, the Shoparound premium according to the AA British Insurance Premium Index rose by 8.3%. Young drivers, who already pay more for their insurance than anyone else, saw their premiums jump by 10.6% to an average of £1,771. And for new drivers, their first premium can be an eye-watering £3,000 or more."2

The AA predicted in July that, as a consequence of these entirely avoidable government-prompted increases, more young drivers would risk illegal ways of getting behind the wheel.

Lloyd adds: "Car insurance is a compulsory purchase, but with these hikes in costs car insurance has been put out of the reach of many young drivers. So they are either putting off learning to drive at all, or are attempting to drive without cover, or are choosing to get a parent to illegally 'front' the insurance for their car."

Fronting involves an experienced driver such as a parent insuring the car in their name, who adds a young person as a 'named' or occasional driver, even though they are in reality the main driver.

"The AA has repeatedly called for the government to cut IPT back to 6% and waive it for new drivers, especially those who use telematics or black box insurance, and to reassess compensation claims and do more to prohibit fraud.  

"I also wonder whether cutbacks in traffic police are leading more people to attempt to break the law and drive without insurance, which has led to the shocking increase in crashes involving uninsured drivers."3

"Without radical government action we will just see more uninsured drivers on the roads, which in turn leads to higher premiums for law-abiding drivers and pricing young drivers out of the market altogether."

The AA is now calling on the government to bring forward its review of the discount rate – as well as cut Insurance Premium Tax.


1 Motor Insurers' Bureau, 29 August 2017. The MIB has reported the first rise in crashes with uninsured drivers in more than a decade. During the year ending 31 July, the number of cases it dealt with increased by nearly 10% to around 12,000 incidents. This is the first rise since 2004.

2 AA British Insurance Premium Index for the quarter ending 30 June 2017. The Shoparound premium for car insurance rose by 8.3% to £690.35 (up 19.6% over 12 months). But for drivers aged 17–22 premiums rose by 10.6% over the quarter to £1,770.96 (22.4% over 12 months).

3 Freedom of Information request by the Press Association, 31 July 2017. It found that cuts in traffic police have accelerated over the past 5 years. Numbers have fallen 24% since 2012, and the overall the number is down 30% since 2007.