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Year end brings another car premium increase

20th January 2012 Print

The rising trend in the cost of a typical quoted premium for an annual comprehensive car insurance policy continued over the fourth quarter of 2011, after a brief stall.

According to the AA's benchmark British Insurance Premium Index published today (19 January 2011) the Shoparound price is now £971.40, a 5.4% increase (from £921.38) over the three months ending 31 December.  The annual increase is 15.3% (from £842.69).

Simon Douglas, director of AA Insurance, is surprised that the increase was this large.

"I expected a much smaller rise, especially following the small fall in premiums during the third quarter of 2011."

The Shoparound index is an average of the three cheapest quotes from a range of insurers, brokers and schemes.  The main Index, which is an average of all quotes for each ‘customer' in our basket of risks, rose by just 0.6%.

"The difference shows that the cheaper deals are disappearing. Young drivers seem to be the biggest losers with a higher than average increase for them," Mr Douglas says.

"It's clear that young drivers continue to be of concern to insurers, while many no longer offer cover to those under 21."

Young drivers

The latest figures from the Department for Transport confirm that young men under age 24 account for 28% of all those killed or seriously injured on Britain's roads and that there are more than twice as many casualties amongst young men (1,153) than young women (514).

The Department for Transport figures explain the big difference in premiums for young men and young women.  According to the AA Shoparound figures, the average premium quoted for men aged 17-22 is £3,194 and for women in the same age group, £1, 879: 41% less

However, following last year's European Court of Justice ruling that using gender to set insurance premiums is discriminatory; insurers will no longer be able to take gender into account from December 2012.

This means that everyone who has bought a car insurance policy since the end of December will find that their next renewal will be affected by the ruling.

"Young women will be see the biggest premium increases," says Mr Douglas.  "It is unknown territory for insurers who will be careful to avoid significant losses they can ill afford."

The ECJ gender ruling has opened the way for more widespread use of telematic or ‘black box' insurance, which sets premiums based on driving performance.

"It puts ownership of responsible and safe driving firmly in the hands of the driver, regardless of their sex.  It is genuinely a gender-neutral product," Mr Douglas says.

AA Insurance is launching a telematic insurance product, to be called AA DriveSafe, in February.

Personal injury claims

The latest figures follow the House of Commons Transport Committee report last week (12 January) which blamed a sharp premium increases in whiplash injury claims on premium increases. 

Three years ago, the AA warned that the rising cost and frequency of personal injury claims was putting pressure on premiums

Although AA believes further sharp premium increases are unlikely it expects prices to continue rising ahead of inflation over the rest of the year.

Mr Douglas says: "Reform of the way that personal injury claims are managed can't come soon enough. It is wrong that injury claims are rising while the number of accidents on Britain's roads is falling."