Record fall in cost of car insurance
Motorists will welcome the biggest fall in car insurance premiums ever recorded by the AA's British Insurance Premium Index. The average Shoparound quote for an annual comprehensive car insurance policy fell to £594.86, dropping 9.8% from £659.53 in July 2012.
Simon Douglas, director of AA Insurance, said: "This fall, the biggest the AA's Index has recorded since it started in 1994, is the sixth successive quarterly drop in premiums. It will be welcome news for hard-pressed motorists facing sharp fuel price increases."
The Shoparound index is an average of the five cheapest quotes for each in a nationwide basket of ‘customers', from insurance companies, brokers and price comparison sites.
"Insurers were facing a fast-widening gap between premium income and claims costs, largely driven by whiplash injury claims and fraud which saw very sharp premium increases between 2009 and 2011," Mr Douglas said.
"That gap is closing and premiums are falling again thanks to competition, as well as improved fraud detection by the insurance industry and tightening of the law that is beginning to curb the number of spurious new whiplash injury claims. The news* that hundreds of rogue ‘no-win no-fee' claims firms have been reined in is welcome and in part, falling insurance premiums reflect that.
"I hope that Britain's shameful reputation as being the ‘whiplash claim capital of Europe' will now be put behind us.
However, Mr Douglas says that the motor insurance industry still faces many challenges: for example bringing down the high frequency and cost of crashes involving young drivers and uninsured driving
He also points out that the gender-neutral insurance environment, following a European Court of Justice ruling which came into effect last December, has seen premiums for young men falling while those for women have either remained static or have risen by much less than expected.
"The background of falling premiums has helped insurers to more effectively manage the premium gap between men and women, although young drivers have fared least well. Some new and young women drivers will have seen a small premium increase, even after taking their no-claim discount into account."
Mr Douglas expects premiums to continue falling but adds: "The cost of car insurance is still around double what it was six years ago."
Car insurance - winners and losers
All ages have on average, seen significant premium falls over the past year but those between 23 and 29 have seen the biggest fall, at 12.8% (to £738.93). The smallest fall was among drivers aged over 70 at 3.9% (to £407.70)
Regionally, areas that have seen the highest activity from claims management companies have seen the biggest percentage drops: Granada 4.4% (to £909.08), followed by the London, 3.5% (to £688.73).