Motor insurance reaches its highest point

The average quote for comprehensive motor insurance in the direct market reached its highest point in almost two years in May 2007, according to Experian, the global information solutions company, indicating a move towards harder market conditions.

Announcing its new Motor Insurance Benchmark, developed to accurately measure motor insurance premium movements in the UK, Experian reveals that the average quote for private comprehensive motor insurance in the direct market increased by 7.9 per cent in May 2007, compared to the same period in 2006 (rising from £519 to £560).

The intermediary market also saw premium rises, with the average comprehensive motor insurance premium reaching £529, its highest point in 11 months, but it was still 0.6 per cent lower than in May 2006. The average premium in the intermediary market is now 5.5 per cent lower than the average premium in the direct market.

David Murby, Managing Director of Experian’s Insurance Services division, said: “The last 12 months have seen comprehensive motor insurance premiums in the direct market increase and overtake premiums in the intermediary market. Traditionally, premiums in the intermediary market have been higher, but after peaking in February 2006 (reaching £557), they started falling significantly. They passed each other in July 2006, when intermediary premiums were at their lowest.

“The whole motor insurance industry is going through a period of transition and it is not as clear-cut as it was 15 years ago. After Direct Line launched in 1985, the number of direct providers entering the motor insurance market grew significantly and this has affected the market share traditionally held by the intermediaries. The arrival of retailers and aggregator sites onto the market has complicated the picture even further.

“Competition is aggressive and with technological advances and changing consumer needs, the industry is unlikely to settle back into a straightforward situation. Information has become key. Motor insurers in both markets need to be able to monitor what is going on in the industry.”

According to Experian’s Motor Insurance Benchmark, third party, fire and theft motor insurance premiums in both markets have continued to emerge as significantly higher than comprehensive motor insurance premiums, due mainly to the fact that they tend to be related to younger drivers with low or no voluntary excesses.

In the intermediary market, third party, fire and theft premiums reached their highest point in almost two years, rising to £617 – a 2.8 per cent increase compared to May 2006.

Experian’s Motor Insurance Benchmark, which will be released on a quarterly basis, aims to provide the most comprehensive view of the motor insurance market. It is based on analysis of 1,000 representative risks selected across key insurers covering over 50 per cent of the market. These premiums were derived using Experian’s market price analysis software tool, Motor Whatif? which is currently used by 44 key UK insurers to monitor monthly price movements.