The UK insurance industry underwent significant changes in the 1970s, with the Association of British Insurers (AOA) recognizing the need for greater incentives for safe driving. While advancements in computing allowed for rewards for accident-free driving, cars of higher performance were penalized when sorted into different groups. This caused foreign cars to be more expensive to insure compared to British cars, despite improvements in importers’ organizations and dealer networks.
The insurance market faced challenges as car ownership increased, leading to the entry of up to 100 new companies that drove down premiums and profits. The situation reached a crisis point in 1971 when Vehicle & General, the UK’s second-largest insurer, collapsed following a stock market crash. This left 500,000 people without insurance coverage, adding to the 1.5 million who had faced similar situations in the 1960s.
To address these issues, the government passed the Insurance Companies Act 1974 and the Policyholders Protection Act 1975, which provided greater oversight and guaranteed 90% of promised benefits to policyholders. There were concerns that the Labour government might nationalize car insurance, but this did not materialize.
In response to high insurance rates for Datsun cars, the UK importers reached an agreement with an underwriting syndicate at Lloyd’s. The cars were reclassified into lower groupings, leading to significant premium savings for consumers. By 1978, the industry had largely adopted the recommendations of the AOA for grouping purposes.
Thatcham Research, established by the UK insurance industry in 1970, played a key role in developing new groupings. The organization conducted crash tests to assess repair possibilities and suggest cost-cutting measures, a practice that continues to this day.
Overall, the 1970s were a period of significant change and regulation for the UK insurance industry, with measures taken to protect consumers and promote safer driving practices. The collaboration between insurers, car manufacturers, and regulatory bodies helped to improve the efficiency and fairness of the insurance market.
