Little change in car and home insurance premiums
10 January 2006
Premiums for both car and home insurance remained static over the last three months of 2005, following small increases during the previous quarter, according to the latest benchmark AA British Insurance Premium Index.
But over the year, the Index shows that the cost of both home contents and buildings insurance fell very slightly. And although the cost of comprehensive car insurance is marginally higher than a year ago, it is still lower than in April 2003. The cost of third party, fire and theft (TPFT) insurance rose by more than 3 per cent to its highest level since the Index began in 1994.
Kevin Sinclair, managing director of AA Insurance says: "The market continues to evolve with the internet rapidly growing as a distribution channel, while new brands are adding competitive edge. The result has been discounting which has eroded much of the modest increases we saw earlier in the year.
"Although this might seem to be good news for customers, I’m still concerned that if car insurance premiums remain static we might see a sudden upward swing later this year. Insurers will find it increasingly difficult to cover their rising claims costs, particularly for personal injury claims."
Car premiums still steady
Over the past quarter, comprehensive car insurance premiums fell by £3.18 to an average quoted price of £762.28. Over the year they have risen by a just under 1 per cent (£6.46) but remain cheaper than in April 2003.
The Shoparound price, however — the average of the lowest quotes in the index — has shown a quarterly increase of over 1 per cent and now stands at £466.56.
Over the year, the Shoparound price has risen by nearly £9.00, much more than the average quoted premium. "This suggests that the lowest priced insurers are beginning to feel the pressure of claims inflation," Kevin Sinclair says.
Reflecting the number of claims made by younger drivers, TPFT insurance rose to its highest average quoted premium at £940.50, a rise of more than £30 over the past year.
Kevin Sinclair points out that third-party insurance is mainly bought by young drivers (hence the higher average paid). "Many insurers won’t cover young drivers at all.
"But some of those that do will offer discounts of up to 30 per cent for young drivers who complete the Pass Plus series of supervised driving sessions, after they pass their test. So young drivers can find discounts by shopping around or by using a broker such as the AA to do so for them." The average Shoparound premium quoted is £545.55, an increase of over 3 per cent during the past three months.
Home insurance premiums fall
Home insurance premiums have shown small rises and falls over the year, but ended the year slightly cheaper than at the beginning.
The average quoted premium for buildings cover stands at £206.78 This is a fall of nearly £2 over the year — despite an increase of three-quarters of 1 per cent over the past quarter. "The AA Index started in 1994, yet buildings insurance costs only 30 pence more than it did then. It represents remarkably good value for money.
"Some commentators have predicted sharp rises in home premiums because of subsidence or flooding — but these have simply not materialised. Rises following some extreme weather soon settled back to their previous levels. It will take a widespread event of hurricane proportions to significantly affect insurance premiums — although, of course, this can never be ruled out."
Reflecting falling crime levels, contents premiums ended the year slightly less than at the beginning, with a fall of 66 pence (0.43 per cent) over the past three months. The average quoted premium is still only £7 higher than in 1994.
Over the past quarter, the Shoparound premiums fell: for buildings by 0.15 per cent to £137.74 and for contents by 0.68 per cent to £84.59.
