Car insurers put price rises into overdrive

Car insurance prices ballooned in the second quarter of 2010, the latest edition of the Confused.com/EMB Car Insurance Price Index (CIPI) has found.

The average cost of comprehensive cover rose by 14.2% between April and June, vastly outstripping the previous rises of 4.3% and 6.3% in the two previous quarters.

These latest figures reveal that prices for comprehensive cover have gone up a massive 31% in the last 12 months, bringing the average comprehensive premium up to £599.

41-55 year old drivers bore the heaviest brunt of the quarterly increases for comprehensive cover, reflecting a generation of parents allowing their children onto their policy. Women suffered the worst from this with drivers of this age group facing a 14% penalty for having named drivers other than their husband.

Simon Lamble, product director at Confused.com said:  "This is a massive blow for motorists who have already suffered at the hands of petrol price hikes and insurance premium tax increases, and unfortunately we do not think we've seen the worst of it. In the last two years visibility of the market through price comparison sites has kept prices down and driven up competition. In order to secure customers insurers have been forced to repeatedly slash their margins, but inevitably this could not continue.  

Zurich publically announced in January it was looking to raise prices by up to 20% and it appears the rest of the industry has followed suit in a bid to get back to profit.. Increasing claims costs, more injury payouts and fraud have created a situation where providers are not making any money."

EMB Partner, Peter Lee said "The dramatic increases seen in the quarter, including a month-to-month rise of over 6% in April alone for comprehensive cover, come off the back of the reporting of some pretty horrendous 2009 results. Insurers' 2009 Financial Services Authority returns showed that the average private car insurer incurred costs of £122 for every £100 of premium received."

Simon Lamble continued "The insurance industry had to pay out £400 million to the Motor Insurance Bureau in 2009 to cover incidents involving uninsured drivers, which translated into £30 on every honest driver's insurance policy.  With insurance costs rising and household budgets being squeezed, consumers are more likely to consider gambling rather than fork out for cover they hope they will never have to call into action. It is important to remember that no matter how safe a driver you are, you cannot rely on the same from other people. Only three in five people think they'll be caught but the harsh truth of the matter is that every three minutes someone is convicted for uninsured driving and the fine and points do not tell the full story of the damage."

"Unfortunately it seems that the already-squeezed average driver will suffer the most, with our index showing that the cars targeted for the steepest rises were family favourites such as 5 door hatchbacks, whilst prestige vehicles fared better."

Peter Lee added "Regionally, customers in Manchester and Merseyside received the largest quarterly increase after one of the lowest levels of increases in the first quarter. At postcode level, the biggest quarterly comprehensive increases were seen in Bradford, East London and Ilford - all in excess of 20%."