The Transport Select Committee's latest report on the rising cost of motor insurance has forced the debate over the related scandals - and they are scandals - of whiplash claims and referral fees further up the political agenda. This is very welcome but there now there needs to be a constructive response from everyone.

For that to happen there has to be an acknowledgement by all concerned that a significant proportion of so-called whiplash claims are phony, either false or exaggerated. How big a proportion is almost impossible to tell but anecdotal comparisons with other European countries suggest it is a far worse problem than most people imagine. What would be useful now is an authoritative comparison across Europe and I would suggest that it is in the interest of the British insurance industry to put up the money for this and then to stand back from the work itself.

As far as I see it there are few people that come out of the current mess without some blame attached to them for creating it. Insurers have been too weak in challenging suspect claims and have participated in the money making merry-go-round of passing claims on; too many claimant lawyers sell people the idea that they have a claim when none exists; the courts have been weak in dealing with fraudsters; and doctors have been too easily duped by people following carefully crafted scripts. It is not a pretty picture.

If each group accepts its share of the blame then maybe we can start talking about finding a constructive solution and the person that has to be at the heart of that is the genuine claimant. It would be a very good starting point if we could start to create a picture of what the genuine claimant looks like: what type of car they were driving, the nature of the accident, their previous medical history, age, likely symptoms and so on. Much of this information already exists with the various motor accident research bodies and the World Health Organisation. It needs to be collated, verified and intelligently - and independently - analysed so that we can make sure that people with genuine claims are dealt with fairly, sympathetically and efficiently. I can't support the simplistic approach advocated by Jack Straw and others that we should switch the onus of proof in soft tissue neck injuries to the claimant. That would put insurers in an invidious and ultimately unpopular position.

I look forward to the next installment of this debate at the All Party Parliamentary Group on Insurance & Financial Services' meeting tomorrow afternoon when the select committee chair, Louise Ellman and Jack Straw will give their views on the way forward. 

The All Party Parliamentary Group on Insurance & Financial Services will be continuing the work it started during the autumn session looking at some of the many issues around the cost of motor insurance, referral fees, whiplash claims and fraud.

Two of the biggest Parliamentary influences in this debate have been the Transport Select Committee and former Cabinet minister Jack Straw's bid to ban referral fees. Next Tuesday the group will be meeting Mr Straw and the chair of the Transport Select Committee, Louise Ellman as it bids to bring together the different strands of this key debate.


Tuesday, 17 January at 4.30pm in Room B, 1 Parliament Street
 
The Transport Select Committee: The Cost of Motor Insurance
What will happen next following the publication of the report on 12 January 2012?

Confirmed speakers
Louise Ellman MP, chair of the Transport Select Committee
Rt Hon Jack Straw MP


We have also confirmed the details of the following two meetings

Tuesday 31 January, 4.30pm, Room S, Portcullis House

Pricing challenges in motor insurance in 2012 and beyond
The impact of the ban on gender as a price differentiator and making motor insurance affordable for young drivers

Confirmed speakers
Mike Brockman, founder and joint CEO, Insure the Box
Richard King, CEO, Ingenie
Grant Mitchell, head of motor insurance, Co-operative Insurance
Adrian Webb, head of corporate communications, esure & Sheilas' Wheels

Tuesday 21 February, 4.30pm, Room S, Portcullis House

The role of medical experts in personal injury disputes
Countering the myth that whiplash diagnoses are always delivered by third rate doctors, in the pay of claims management companies or personal injury lawyers

Confirmed speakers
Dr Simon Margolis, CEO and Donald Fowler, MD of Premex Group
Dr John Canning, Chair of the Professional Fees Committee, British Medical Association

These meetings are open to members of the public but accommodation is sometimes limited.

Ed Miliband's beleaguered leadership of the Labour Party may not survive much longer but his forthright honesty in facing up to the inevitably gloomy economic backdrop to the 2015 General Election campaign should be of lasting benefit to the Labour Party.

His attempts this morning to breathe fresh life into his leadership have already been roundly mocked and his Radio 4 interview did sound rather desperate as he talked about his "inner belief' and dipped into the banal lexicon of American politics, tossing around phrases such as "Bring it on". If you look beyond that to the substance of what he said you can see the battle lines being drawn up for the next election. I don't think anything he said will unduly worry the Conservatives but the Liberal Democrats could have a real problem on their hands if Labour sticks to the Miliband line under a new leader.

His analysis of the most likely economic scenario as we go into 2015 is in line with most forecasts and his response to it is actually quite astute.

The choice in 2015 will be a grim one, rather as it was in 2010. The hopes of the Coalition Government that by 2015 the worst of the deficit cutting would have been done and that we would be seeing the first signs of the spring of economic recovery have been dashed by the Eurozone crisis. This is a far bigger blow for the Liberal Democrats than the Tories. The Lib Dems pinned their most fervent hopes on being able to detach themselves from the Tories in 2015, enabling them to say that the nasty job of cutting the deficit and setting the country back onto the road to recovery had been done. This would have given them a platform to boast about their part in securing that recovery and to set out a manifesto for the future that would offer the country undiluted Liberal Democracy. That hope has now gone.

The trap waiting for Labour
The next election will be highly polarised with the Tories arguing that the austerity programme needs to continue unabated and that they are the party to deliver it, especially if liberated from the (only mildly) restrictive confines of the Coalition Government. The trap for Labour would be to pretend that it can make all manner of promises about new spending which could not be delivered and which would merely remind the electorate of the economic disaster area that surrounded the previous Labour government. Ed Miliband has started to steer Labour away from that trap. If Labour can develop a coherent set of policies around a "fair austerity" theme then it could have the potential to win over many disillusioned Liberal Democrat voters.

It is hard to see the Liberal Democrats being able to counter the painful squeeze on their vote that an austerity election fought on these lines would exert. There is no obvious locus for them in a debate between Labour and Tory on these lines. To most people they are not a party with a strong, distinctive economic vision and are not going to be able to develop one while they are tied into the Coalition. One of the cleverest things that David Cameron did when forming the government was to give the Lib Dems the Financial Secretary to the Treasury knowing that this post would require a Liberal Democrat minister to take the lead in proposing and defending the deep cuts in public expenditure. The Lib Dems didn't help themselves by appointing David Laws to this post. His enthusiasm for swinging the public expenditure axe made George Osborne look positively restrained. Laws replacement Danny Alexander hasn't done much better as he has failed to develop a distinctive Lib Dem approach to the task, leaving his party with no option but to defend the Tory cuts at the next election.

The Tories also out manoeuvred the Lib Dems on tuition fees where they managed to saddle poor Vince Cable with the job of proposing the massive U-turn in Liberal Democrat policy on tuition fees. There is no escaping from taking responsibility for that despite attempts by some leading Liberal Democrats to argue retrospectively that the higher fees and the new system that supports them is fairer: that isn't what they told people at the last election.

This wouldn't be so bad for them if they were achieving some of their other cherished objectives such as political reform or a closer relationship with the European Union but these have all blown up in their faces.

Nick Clegg's rash charge into a referendum on the Alternative Vote was a disaster as it enabled the electorate to punish him for the betrayal over tuition fees. I don't hold out much hope for genuine reform of the House of Lords being achieved in this Parliament either.

Eurosceptic stance has boosted Cameron
Then there is Europe where Cameron has seized the first real opportunity that came his way to play the Eurosceptic card - and with some significant effect. The right of the Tory party, restless over what they were starting to see as too many concessions to their coalition partners, are now suddenly held in the palm of his hand. The wider electorate has also warmed to his Eurosceptic approach as most people fear being dragged too deep into the Euro crisis while we are still struggling with severe economic problems of our own. It has also given Cameron and Osborne a very convenient fig leaf to use as they will be able to shift some of the blame for the consequences of their draconian economic policies onto Europe while saying they are fighting the UK's corner for all they are worth.

Today might not mark the rival of Ed Miliband's leadership but he has made a good start on positioning Labour well for the next election.       

Of course the insurance industry was going to be quick to welcome Prime Minister David Cameron's call for shareholders to exert greater control over excessive executive pay and bonuses. The industry, through the Association of British Insurers, has called for restraint and tougher scrutiny for some years. Through its investment committee it has co-ordinated some of the handful of shareholder revolts there have been in recent years, albeit most have been ineffectual.

The industry had little option but to welcome the government's move and the new director general Otto Thoresen was quick off the mark voicing broad support for the Prime Minister's proposals. He couldn't do anything else but there was more than a little caution in his remarks on BBC Radio 4 this morning. This is easy to understand.

He made the obvious calls for greater transparency in what is presented to shareholders and for this we will have to wait a little while for the detailed proposals to emerge from Vince Cable's business department. Mr Cameron had little or nothing to say on this yesterday, giving his announcement a rather superficial ring.

The real problem for the ABI, however, is that the government is trying to shift the responsibility for doing something about this issue - around which there is a lot of public anger - from its desk to somewhere else and the institutional shareholders look the most likely recipients. The potential for the Prime Ministerial vision of the vigorous assertion of shareholder power to turn into a nightmare for insurance and pensions funds seems considerable.

The first problem is not merely the lack of transparency in what is included in company reports but the fact that it is retrospective. Voting against a remuneration report at a company general meeting is little more than a slap on the wrists. After all, the report is about money that has been paid. There is nothing so far from the government that suggests shareholders will be given powers to stop excessive pay and bonuses before the money is handed over. This would require a fundamental overhaul of the composition of boards and especially remuneration committees and that is not something that is going to happen overnight.

There is some talk of creating powers to claw back money that shareholders do not think should have been paid but this sounds like a nuclear option and one that could, if exercised, lead to disputes finding their way into the courts.

We then have the challenge of deciding how much transparency should be introduced, how revealing it should be of individual's finances, how far down the executive ladder the harsh new spotlight should shine and how it will explain the complex packages that are now commonplace.

Even if you can tackle these problems - and there are proposals from a range of policy think tanks that offer some answers - the institutional shareholders will then have the challenge of managing public expectations. The institutional investors represented by the ABI are an influential group but they are not as powerful as they once were. A growing proportion of shares in British companies are now in the hands of hedge funds and overseas investors and they are going to be hard to engage in this debate, let alone convince to be become activist shareholders.

The ABI has a tough balancing act to perform as this debate gathers momentum. It would be a mistake for it to go to the government and demand too many new powers because that could raise public expectations of how much they might be able to achieve by using them. However, it has to be seen to be willing to take some responsibility for acting on behalf of the wider public whose money it is investing.

   

The insurance industry is going to have to hit the ground running when it comes to engagement with government, Parliament, Europe and regulators in 2012. The agenda is long and presents some very significant challenges to insurers.

Several of the issues - most notably those around motor and household insurance - take us into some very tricky areas, posing questions about what is insurance for and how should it be priced. The investigation by the Transport Select Committee into motor insurance was prompted by the rising cost of premiums and a desire to understand the reasons for this. That debate has been broadened by the instigation of a full Office of Fair Trading investigation into motor insurance costs.

Running in parallel to that, at least in the minds of many MPs and commentators, will be the increasingly frantic discussions about the future of flood insurance. The need to put in place a scheme to replace the Statement of Principles has thrust this issue firmly back on the political agenda.

You can throw into this already quite volatile mix the aftermath of the payment protection insurance (PPI) scandal, the pressure to create simpler, more affordable life assurance plans and the Law Commission's continued reform of insurance contract law. You may think these are not especially closely related issues but I fear that in the minds of many they will be linked and will prompt them to question what insurance is for?

Industry experts may feel this will be no bad thing as it will create an opportunity for them to set out their stall and clear away some of what they believe are the misconceptions about what should be insured and what people should no longer expect to find included. This may turn out to be a trifle naive: just listen to the ABI's Nick Startling being questionned on BBC TV about insurers' "moral obligation" to offer flood insurance to people in high risk areas to get an understanding of a very common view of the role of insurance.

Rising motor insurance premiums will clearly nag away at policymakers and MPs especially as above inflation increases take their unwelcome toll on tightening household budgets. The only answer is to get a grip of costs and the insurance industry should, if it continues to engage intelligently with this debate, find allies among MPs and the OFT. Insurers feel they need a public policy mandate to tackle some of the more painful and controversial cost pressures such as referral fees, credit hire and vehicle repair bills. All of these are problems the industry has brought upon itself over the last 20 years and which it now feels powerless to tackle itself but by working with Parliament and regulators it may be able to re-establish some control.

Alongside this is the problem of fraud which the industry and its policyholders are both victims of but have yet to create any sense of common interest in tackling. The debates in Parliament may help achieve this illusive unity of purpose and finally get the message home that insurance fraud is not the victimless crime that many people imagine it to be.

It is the flood insurance debate that I think holds the greater political dangers for the industry, however.

Motor insurance costs have obviously grown as an issue that constituents raise with their MPs but the complaints are pretty evenly spread around the country and, crucially, are not connected. Flood insurance is potentially a far more incendiary political issue as the 200,000 households the ABI estimates are most likely to be cut adrift after 2013 if a solution to affordable insurance cover isn't found are geographically concentrated and are already connected through some very well-organised and vociferous action groups. They will be impossible to ignore.

It is hard to see how the insurance industry can make genuine common cause with these groups and the MPs who represent them. It is certainly possible to see them turning up at DEFRA (the Department for Environment, Rural Affairs and Food) to lobby ministers for a government subsidy to ensure that flood insurance remains available and affordable but the moment that isn't forthcoming (hard to see it happening in the current financial climate) the policyholders will turn to the insurers and play the "moral obligation" card.

All the while these debates are going on, those other issues will also be prompting fresh questions about the role of insurance and the ability of the insurance industry to meet the needs of society and UK plc, especially if we really are facing an economically lost decade. It will clearly require maximum engagement with government and policymakers but it will also require more than a little fresh thinking as 2012 unfolds.