Dr. Cyril Roux:

There are two points. First, what is the equilibrium premium and, second, whether the high premium people pay today is the equilibrium price, that is, something which is sufficient to cover the claims that will come out of the policies that people buy. The jury is out because we will know in several years time but our sense, and it is very preliminary, is that prices are at barely break even level. If the claims were to stay where they are today, and if the investment income was to stay where it is today, then the equilibrium premium would be where they are or slightly higher. That is my contention.

There is an insurance cycle, so year on year premiums can be higher or lower. As this committee wants to achieve a significantly lower charge of claims, a sustainable lower charge of claims would be the way to give the ground for sustainably lower premiums. This is why the work of this committee is so important in looking at fraud, whiplash claims and roads safety. The book of quantum was published yesterday and the hope is that it will be used as judicial guidelines, although it is at the discretion of the Judiciary. All of that is very important. If the claims stay at the level at which they are now, however, and if the aggregate cost of claims stays at this point, there is no basis for a sustainable reduction in premiums. That is why it is so important that the overall cost of claims goes down.