Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what discussions she has had with the Financial Conduct Authority on the potential impact of changes to the costs of car insurance on vulnerable motorists.

Insurers make commercial decisions about pricing and the terms of cover they offer based on their assessment on the likelihood of a claim being made and the cost of those claims. The Government does not set the terms, conditions, or prices for insurance policies. Motor insurance premiums have been affected by specific economic factors that increased the costs of claims, such as the rising cost of replacement car parts.

Last year, the Government launched a cross-Government taskforce on motor insurance. This Taskforce has a strategic remit to set the direction for UK Government policy, identifying short- and long-term actions for departments that may contribute to stabilising or reducing premiums, while maintaining appropriate levels of cover. The taskforce most recently met in April and the Government will provide further updates in due course.

The Financial Conduct Authority (FCA), as the independent regulator, is a member of the Taskforce. Last October, the FCA launched a package of work on the motor insurance market, including a market study on premium finance. The FCA requires firms to ensure their products offer fair value (i.e. if the price a consumer pays for a product or service is reasonable compared to the overall benefits they can expect to receive) and has powers to take action against firms that don’t meet its requirements.