Drink driving and thewider purpose of insurance

By Jonathan Goodliffe
It is a commonplace that the effective combating of drink driving requires the participation of a wide range of bodies both public and private.The insurance industry is one body which obviously has an important role to play, indeed it cannot avoid being involved, and yet arguably the industry could and should take a more active role, not only in reducing deaths and injuries caused by drink driving, but also in the wider development of policy relating to the reduction of alcohol related harm.

The UK drink driving problem
In 2006, 540 people are estimated to have been killed in motor accidents involving illegal alcohol levels. 1,960 people were seriously injured and 11,880 slightly injured. In 1995, when the figures for deaths were similar, the Government estimated that another 250 people were killed in accidents involving drivers and riders with raised blood alcohol levels, but below the legal limit.

The blood alcohol limit for driving in the UK is 80 milligrammes of alcohol in 100 millilitres of blood. In most of the rest of Western Europe it is 50mg%. Over the last 10 years the police, magistrates and the medical profession have supported a reduction in the current UK limit, but it is not clear whether this will ever be done.

There are other things that might help to reduce deaths and injuries. Examples include more publicity for “don’t drink and drive” and more resources for police enforcement. Subject to human rights considerations blood testing might be carried out at random. Ensuring that banned drivers are not driving without a licence and insurance is also crucial.

The responsibility of society
In the latest government paper on its alcohol strategy, Vernon Coaker, Under-Secretary of State at the Home Office, identified an equally important approach to reducing alcohol related crime. He said that “promoting a sensible drinking culture that reduces violence and improves health is a job for us all … Business and industry should reinforce responsible drinking messages at every opportunity.”

I recently asked for an interview with Nick Starling,who is the head of general insurance at the Association of British Insurers (ABI). Mr. Starling has recently joined an alcohol policy panel convened by Alcohol Concern. I wanted to ask Mr. Starling about the insurance industry's role in reducing the problems arising from drink driving.There was nothing on this subject on the ABI’s website.

I heard back from the ABI’s press office: “[Mr. Starling] feels that, given that he has had only a very brief contact with Alcohol Concern and that we have relatively little to say on this, that it would not be worthwhile your interviewing him. I am happy to outline the main insurance implication of drinkdriving - higher motor insurance premiums - if you wish.”

The wider purpose of insurance
This response hardly does justice to the role of insurance in modern society. Insurance not only protects the financial interests of policyholders and of people whom they have harmed. It also may encourage a more creative approach to the management of risk, including alcohol related risk.

For example in some US states insurers underwriting lawyers’ malpractice cover have taken a lead in founding programmes for helping addicted lawyers. These programmes also educate other lawyers about how to recognise the problem in colleagues and to provide help. No doubt the insurers hoped that they would reduce claims rates and increase their profits. They also helped the individuals concerned and their families and contributed to improving the quality of the legal service provided to their clients.

Another example of “enlightened self-interest” is the insurance industry’s involvement in the subject of climate change. It (and the ABI) has a leading role in the long term planning of counter-measures, such as flood defences, and in promoting climate awareness.

What about motor insurance?
No equivalent process is apparent in the field of motor insurance. People who take out motor insurance (in contrast to, for instance, life or illness insurance) are not usually asked about their drinking habits. The applicant for cover will, however, be required to declare any motoring convictions for drink driving. In the absence of such a conviction alcohol misuse will not be identified. So, in a sense, motor insurers underwrite against the risk arising from alcohol misuse only after the risk has materialised. A part of the wider social purpose of the underwriting process is therefore lost.

20 years ago alcohol and other health issues were more systematically covered on proposal forms for motor insurance. The insurer is liable, however, to anyone injured by the motorist’s drink driving even if it repudiates the insurance because of the motorist’s fraud. The insurer may sue the motorist to recover its payout to the victim, but that will generally not be cost effective. It may be like trying to get blood out of a stone. So losses can only be recouped when the motorist gets his licence back and is charged a penal premium.

Heavy competition in the motor insurance market is another factor. Insurers and their intermediaries advertise how easy it is to get insurance, particularly over the internet. Too much focus on getting the motorist to ask himself whether he is fit to drive may dilute that message and lose business. Insurers give advice on their websites as to how to avoid an insurance claim. This advice does not seem to include “don’t drink and drive”.

A motorist is, of course, under a legal obligation to notify the licensing authorities if he becomes unfit to drive. Problem drinkers, however, are typically in ‘denial’. So a more effective approach might be for insurers to raise the issue when cover is taken out and every year when it is renewed.

New York legal rules
Under New York law insurers are required, when issuing or renewing motor insurance, to provide a statement on this issue to every insured (i.e. not just the policyholder but also any ‘named’ drivers). The statement outlines the legal and financial consequences of convictions for operating a motor vehicle when under the influence of alcohol or drugs. The six page statement contains the following passage: “We [i.e. the New York insurance industry] strongly endorse the message conveyed by the law – that it does not pay to drink and drive.”

Corporate socialresponsibility
The ABI’s apparent lack of interest in drinking and driving may not, however, be representative of the attitude of the insurance industry as a whole. Lord Sharman is Chairman of Aviva, the international insurance group which includes, among other members, the Norwich Union.He remarked in the Aviva 2007 corporate social responsibility (CSR) report:

“The board remains keenly aware ofthe need to develop our business to be sustainable and responsive to the needs of customers, staff and the wider communities in which we operate.”

Motor insurance and its wider purpose (in contrast to, for instance, climate change) does not seem to be covered in insurers ’CSR policies. There are, however, at least three good reasons why it should be:

• motor insurance is compulsory and therefore a captive market for insurers. The profits from that market should be counterbalanced by a more significant contribution by insurers to the development of longer term solutions to the risks which they cover

• this is not an area where the initiative is likely to come from the insurance industry’s regulator, the Financial Services Authority. The FSA’s statutory objectives do not include protecting and treating fairly people who are liable in the future to be injured in motor accidents. So motor insurance (unlike, for instance, payment protection insurance) is not currently a problem on the FSA’s regulatory agenda

• in other areas of insurance against risks where alcohol misuse may be a factor, such as professional indemnity, life, illness and fire, research carried out by Aviva and other insurers (including for instance, Swiss Re and SCOR) has provided valuable insights for the study and reduction of alcohol problems. When insurers apply their minds to these matters the result can be significant.

It is to be hoped that a dialogue between government, insurers and professionals in the alcohol field will ultimately emerge.

This article first appeared on the Complinet Insurance news service.