RSS Feed

Related Articles

Related Categories

Car insurance rises falter

20th January 2015 Print

Average quoted car insurance premiums have risen by just £1 over the last three months of 2014, according to the latest AA British Insurance Premium Index.

The Index’s average Shoparound quote (using both direct/broker and comparison site prices) for an annual comprehensive car insurance policy increased by 0.2% to £540.26 – up from £539.19.

This compares with a rise of 1.2% over the previous quarter, which was the first increase in three years. Premiums are 10% cheaper than this time last year.

Janet Connor, managing director of AA Insurance, says that despite the faltering movements recorded by the Index she expects insurers to continue to push for premium increases.

“Some insurers may have lost business by increasing premiums, leading to a ‘year-end sale’ to boost market share, so car insurance is still very good value.

“Car insurance is extremely competitive. Nevertheless the underlying trend is upward, although I think premiums will struggle to rise past 10% by the end of the year.”

Ms Connor suggests that premium falls over the past couple of years have had more to do with competitive pressure than benefit brought by the Ministry of Justice in its Laspo (Legal Aid, Sentencing and Punishment of Offenders) reforms, aimed at cutting fraudulent and exaggerated personal injury claims.

“The facts speak for themselves. The number of personal injury claims is now higher than before the Justice Ministry reforms were introduced. Over the 12 months ending March 2014, the average number of claims was 66,000 per month. They now stand at an average of nearly 71,000 per month**.

“As a result, current premiums are simply unsustainable,” she says.

The second phase of the Justice Ministry’s whiplash reforms aims to protect honest claimants by outlawing personal injury claims being settled without a medical assessment taking place.

“This new medical reporting accreditation system is welcome, as it should ensure claimants receive a high standard of service from an independently allocated medical reporting expert,” Ms Connor comments.

“The finer details remain to be clarified but my view is that in order to reach an informed decision all circumstances of a collision should be taken into account, such as vehicle damage, to confirm the likelihood of injury.

“This would put off those looking for an easy cash win but would not discourage those with a genuine injury.

“In addition, the AA has consistently called on the government to prohibit whiplash injury claims for low-speed collisions as well as settling justified claims with rehabilitation rather than cash.”

Ms Connor also suggests that changes proposed by the Competition and Markets Authority (CMA) on competitive pricing between insurers and price comparison sites has led to additional discounting and ‘special offers’ by some insurers.

“Changes proposed by the CMA could make it more difficult for customers to find the most competitive premium: they’ll have to check different comparison sites as well as direct insurers to find the best deals.”

Winners and losers – by age

Young drivers are the winners this quarter with those aged 17-22 seeing a rise of just 45p in their average Shoparound premium quote although they pay by far the highest premiums by age at £1,216.96. Over the year, the youngest drivers also benefited from the biggest fall – 15.2%. Age 23-29 was the only group to see average premiums fall, by 0.2% to £681.17, over the quarter. Those aged 60-69 pay the lowest premiums but saw a modest increase of 0.3% to £297.23. The oldest drivers (70-plus) suffered the biggest quarterly jump, 1.3% to £366.69 and the smallest annual fall (down 1.7%).

Winners and losers – by region Scotland remains the cheapest region in the UK to insure a car, despite a small increase in average quoted premium for the second quarter in succession (0.5%). Premiums fell in five regions, Northern Ireland seeing the biggest drop (down 2.2%), although on average it has the highest premium at £815, comparable with north-west England where premiums rose by 0.7% to £800 although this region has seen the biggest annual fall (13.4%). The cheapest in England is the West, which saw a premium rise of 1.4% to £428. The biggest increase was in East Anglia, where average premiums rose over the quarter by 1.8% to £494.