The latest AA British Insurance Premium Index showed that the average quoted premium for an annual comprehensive car insurance policy has fallen by a record amount yet again.1 But the average masks big regional differences.
And although many insurers have expressed concern that prices have fallen to an unsustainable low, there has been little sign of the rate of fall slowing, despite predictions that prices will start rising again soon.
The average quoted Shoparound premium for an annual comprehensive car insurance policy fell over the three months ending 30 June by 6.1% to £504.29,2 wiping more than £30 off the average price quoted for a new insurance policy. Over 12 months, the fall was more than £120 or 19.3% and, for the third quarter running, was the largest 12-month fall ever recorded by the 20-year-old British Insurance Premium Index.
The Index also highlights the extremes between postcode regions, the most expensive being London2 – commanding an average quoted premium of £922.44 – followed by postal area IG, which includes Ilford, Chigwell, Woodford Green, Buckhurst Hill, Loughton and Barking (an average quoted premium of £912.07). Greater Manchester (M) is third at £820.63.
The cheapest, the Isle of Man at £231.49, is followed by KW, the extreme north-east of Scotland including Orkney (£252.13). The cheapest mainland postal area for car insurance is TR in the south-west of Cornwall (£279.72), less than a quarter of the average paid in London.
The study underlines the part that postcode plays in calculating car insurance premiums.
Janet Connor, managing director of AA Insurance, points out that car insurance premiums take into account not just the experience and age of the driver and the car model being driven, but a range of other factors including where the car is normally kept.
There are some signs of the downward trend reversing with average premium increases in a few of the post codes
Janet Connor, managing director of AA Insurance
"The premium reflects the likelihood of a claim being made, and in some urban areas there is much greater risk of a collision taking place, or of car crimes such as theft of or from a vehicle, uninsured driving or attempts at 'cash for crash' fraud.
"Sadly, the criminality of some people has a detrimental effect of the premiums paid by honest motorists in such places.
"But over the past year premiums have, on average, fallen in most areas of the UK and, encouragingly, some of the biggest falls have been in postcode areas that traditionally have paid the highest premiums," she points out. "However, there are some signs of the downward trend reversing with average premium increases in a few of the post codes.
"I hope that the measures being introduced by the Ministry of Justice to curb fraudulent injury claims, and also continued work by the Motor Insurers' Bureau and the police to reduce the number of uninsured drivers, will help to ensure premiums in such places are affordable.
However, Janet Connor doesn't expect the current premium falls to continue. "There are already signs that some insurers are looking to put their prices up, and I believe that this time next year the AA Index will be reflecting a rising trend. But I don't expect to see the sharp premium inflation we saw between 2009 and 2011, when over a 12-month period premiums rose by more than 40 per cent."
1 According to the latest BIBA (British Insurance Brokers' Association) and Acturis Insurance Index the cost of car insurance fell by 4.9% over the second quarter of 2014. Media contact: Leighann Forsyth, BIBA, 020 7397 0223, email@example.com
2 AA British Insurance Premium Index, 2014 Q2, 'Shoparound' (average of cheapest five premiums for each risk) weighted average premiums and quarterly movements of comprehensive insurance from the broker market.
18 August 2014