WEDNESDAY 28 FEBRUARY 2007

MR NICK STARLING, MR JUSTIN JACOBS AND MR DOMINIC CLAYDEN

  Q80  Mr Hollobone: I am unclear as to whether our insurance friends are asking for a change in the tuition to pass the licence or further restrictions after someone has got their licence. To put my question another way, what would you require in terms of either of those two things to halve the premium gap for a novice driver at 17 and an experienced driver at 35?

  Mr Starling: We have put forward four proposals which we think would go quite a long way to dealing with the problem. The first is structured learning, the log book approach. The second is a minimum learning period, which we think should be a year. The third is restrictions on the number of passengers you can take after you pass. We suggest that you should have no more than one passenger under 20 for the first six months, that would make a major difference. The fourth is what we think the insurance industry can do, which is discouraging young drivers from going out at night. We do not think there is anything you can do in terms of government action in terms of curfews, that would be impractical, but the insurance industry can do that. Overall, which approaches your second point, on the insurance costs of a major driver, if I can use that phrase, in getting better behaviour, and if young drivers buy less powerful cars, drive more safely, the rewards come in terms of reduced premiums.

  Q81  Mr Leech: I think, and I am sure you will correct me if I am wrong, one in four accidents are caused by people who do not have insurance. Do you think that tougher driving tests and graduated schemes would have an impact on the number of people who will choose not to pass a test and get insurance and just drive illegally?

  Mr Starling: I do not know if your one in four figure is right; it sounds about right. We know that one in twenty drive when uninsured. There is obviously a risk that if you make it tougher people are going to evade the law. Rather than avoid making the test tougher we think you need to manage that risk. In fact, the Government has taken some major steps towards tackling uninsured driving which we think will begin to tackle that very particular risk, and it is a risk.

  Q82  Mr Leech: Do you think that a graduated scheme might have an impact on the number of people who just choose to drive without insurance and without a licence?

  Mr Starling: It is possible that if you make the test tougher, more difficult to get through and a longer learning period, that is a risk, yes, but what I am saying is you need to manage that risk separately rather than change the proposals.

  Q83  Chairman: How would you manage that risk because after all we already know that large numbers of people drive uninsured and almost inevitably that means they are driving illegally one way or another? What is managing this risk that is separate? How do we manage the risk that represents?

  Mr Jacobs: The challenge is do we do nothing because it becomes difficult to enforce or do we find a way of dealing with the risk. With uninsured driving a lot of the processes for tackling uninsured driving rely on number plate recognition and the ANPR cameras we were hearing about earlier. If people are driving uninsured as a result of this they become easier to spot, easier to pick up through the ANPR enforcement regime and through the new proposed offence of keeping a vehicle without insurance. In a way, if as a consequence they move into being uninsured you will be able to find them much more easily than you would otherwise be able to do.

  Clive Efford: I feel extremely privileged as a car driver because I bet there are millions of car drivers in the country who would like to see the whites of your eyes as we can today.

  Chairman: They have not realised we have got the doors locked!

  Q84  Clive Efford: Do you not make money out of people having accidents? What incentives are there in the market for you to reduce the number of accidents.

  Mr Starling: The first thing I would say is the insurance industry for over 300 years has wanted to drive down risk and it has done it right from after the Fire of London, if I may put it in an historical perspective. We want to drive down risk and want to make people behave more safely and reduce costs. That may not be in the whites of our eyes but it is in our DNA, if you like. That is what we want to do. We deal with major accidents, as Mr Clayden said, and we do not like it. You might almost say we have a moral approach to this. What is happening for young drivers in particular is wrong, you can almost describe it as carnage, and as an industry we want to do what we can to stop it.

  Mr Clayden: In direct response to your question, we make money out of people who do not have an accident, which may seem like a glib statement. The other feature is every time you turn on the TV or open a newspaper there is an advert for car insurance, it is an incredibly competitive market. We are searching always for better ways of understanding, taking risk out of the process to price your product or somebody else's product. If cost comes out the market will adjust the premiums downwards. This is not a competitive advantage we are seeking or a profit making advantage, it is just our experience of dealing with these claims. As Mr Starling says, it is carnage.

  Q85  Clive Efford: You are risk-free. All right there is a competitive market, I accept that, there are other insurance companies, but there are only a few major insurers behind it all. The fact is that you just put premiums up. You put the premium up for the individual who has made a claim, they will lose their no-claims bonus, et cetera, but you will also put the premiums up across the board to cover your costs. You are risk-free, are you not? How do we get an incentive into one of the sections of the motoring industry, the insurers, to get involved in reducing accidents?

  Mr Jacobs: In a way it is that independence that we bring to the table, if you like, because you rightly are seeing road safety lobbying groups who have a strong road safety perspective and you are seeing representatives of the motor organisations who want to represent the motorists. In a way, if you like, we are the hard-nosed business people, we see the risk and what the industry is all about is managing it down. Just as we campaign in other areas on climate change or whatever, what we bring is that independence, we are not trying to represent any one vested interest at all but we see what is happening and identify it.

  Q86  Chairman: What about mammon, Mr Jacobs? Are you not representing mammon?

  Mr Jacobs: What drives the financial interest of the industry and the competition within it is that everybody wants to be able to help drive down the risks to their customers because that is the way to attract customers, to be able to offer them better value premiums. I think that is why you see initiatives such as Pay-As-You-Drive.

  Chairman: Gentlemen, I want you to escape quite soon but there are certain things I want to ask.

  Q87  Clive Efford: I just want to ask about the incentives in the Pay-As-You-Drive insurance policy and just exactly how that affects driver behaviour.

  Mr Clayden: From the Pay-As-You-Drive product, which is a Norwich Union policy, we have analysed the data and, as I indicated before, the cost of claims are driven roughly in two halves, one of which is the cost of repairing the car and the other is the cost of injury claims. From analysing the data we have been able to identify that driving in different types of road condition has a different cost-risk rating, to put it that way round. If you are particularly a young person driving after 11 o'clock at night, in terms of our pricing that will cost a pound a mile, to give you the context. In terms of claims cost it is extremely expensive, a lot of expensive accidents happen at that time of night. If, on the other hand, you drive at non-peak times and drive on motorways, which from an insurance point of view are less risky, then it is an incentive. We have been able to give people a choice and people actually choose, because they understand it costs more to drive after 11 o'clock at night, not to drive so much at that point, which has taken the accidents down by 20%.

  Q88  Clive Efford: Is it the fact that they are not driving at the time when accidents are most likely to happen, not the fact that they are driving less?

  Mr Clayden: Yes, it is just a different choice feature because the economic decision is in reality they will not drive at that point.

  Q89  Clive Efford: I will put the question another way. Is the amount of time that they reduce their driving hours outside of those peak accidents periods similar, that they choose to drive during the day rather than after 11 o'clock at night, or is the time they spend driving down right across the board?

  Mr Clayden: Specifically nothing has been flagged to me in terms of people's driving patterns, it is just avoiding the periods when most accidents happen.

  Q90  Mr Martlew: At the moment I tend to be agreeing with you on the idea of the graduated licence and perhaps a year's training period. The reason we are here is despite the fact that road accidents and road deaths are going down, in this particular group they are going up. Has anybody got any reason why that is happening? If we knew the reason we could perhaps tackle it in a different way.

  Mr Starling: We do not know the reason. We know that fewer people are taking the test and we think that is partly because more people are going to university, but why there are particular behavioural changes we have not done any research into that as to why it is going up.

  Q91  Mr Martlew: Does anybody else have any ideas?

  Mr Clayden: I can only speculate from the anecdotal to say the feature comes to more young people getting into a car and driving at that period. If I look at our experience, that is when we see the fatalities happening. We look down the list of claims we have got and that is when the accidents happen and it is multiple occupancy.

  Q92  Mr Martlew: So you are saying it is not more crashes or more drivers killed but more people in the car. Statistics say there are more drivers as well. It is still a mystery why it is happening, is it not?

  Mr Starling: We have not done any analysis on that.

  Q93  Mr Martlew: If we raise the age or if we make it more difficult, is it not going to lead to more young people driving without licences because it does not stop youngsters from driving but it stops them driving legally, does it not? Do you think that will be the case?

  Mr Clayden: I think I said earlier it is a risk that would happen more, I am just saying you would have to manage the risk. The particular risk of uninsured driving is something that the Government is now tackling, so if you now go out uninsured you will get caught. The law has now changed so that you can get caught before you even get in your car. It is important that you tackle this across the piece, but tackling uninsured driving separately from what you have to do to get the road accidents down for young drivers.

  Q94  Mr Martlew: The evidence only shows that car is uninsured, it does not say that the person driving it is insured, does it?

  Mr Starling: The main thing you can do is you can pull it over and stop the driver, that is the key thing about stopping uninsured driving.

  Q95  Mr Martlew: I am sorry, maybe I am not explaining it very well. A young man takes his mother's car to drive, he has not got a licence but the car is insured, the police will not pull that car over for not being insured, will they?

  Mr Clayden: I guess one of the control mechanisms on that is if there is an accident in the car the insurance company will not pay for the repair of the car.

  Q96  Mr Martlew: Right, so the mother is going to be very upset about it.

  Mr Jacobs: The other thing to flag up in relation to that is the UK is one of only five out of the 25 EU Member States that allows people to pass their driving test at the age of 17, every other country, apart from Ireland, Austria, Greece and Hungary, has 18 as the minimum age for passing the test.

  Chairman: What evidence is there that if that change came about here we would not get more people driving without licences and uninsured?

  Q97  Mr Martlew: I will stretch that point a little further. The area I represent has a large rural hinterland and the public transport is very poor. If you raise the age to 18 this is either going to create great social problems for young people or mean that more of them are going to be breaking the law, is that not the case?

  Mr Jacobs: I think it is about learning how they do it in other countries because if they can have 18 as the minimum age in other countries and minimise the social consequences then I am sure we could learn from how they do that and apply the same process here.

  Q98  Mr Martlew: This is my final question, and I suspect you gentlemen may have the answer to this because of the way that you look at postcodes. Is there evidence that the number of accidents is spread across the socioeconomic range of the country but there are more accidents, serious accidents, from the poorer areas of the country? That would help us to target training or whatever.

  Mr Clayden: I am not sure I would be able to identify poorer. What we do see is geographic differences in terms of—

  Q99  Chairman: You must. Come on, Mr Clayden.

  Mr Clayden: No. The North-West has a feature of having a higher claims cost but what I do not know is whether you could identify that as being because people drive in a different way or have a higher propensity to claim.