British Insurance Premium Index

Car premiums reach all-time high, home premiums fall

2 July 2007

Car insurance premiums have reached their highest ever level, according to the AA's benchmark British Insurance Premium Index.

The Index shows that over the past quarter, the average quoted premium index for an annual comprehensive car insurance policy rose 2.5 per cent to over £822. This is, for the first time, more than twice the index quoted in July 1994 when the AA Index was first published. Premiums rose by over 6 per cent in 2006, but after falling slightly during the first quarter of 2007 have resumed their upward trend.

The average premium quoted for those who buy third party, fire and theft (TPFT) insurance also rose to its highest ever level, passing the £1,000 mark for the first time.

However, both home buildings and contents insurance premiums fell slightly, cancelling out recent small increases and reflecting the continuing competitive market for home cover. With a fall of nearly 2 per cent, the average quoted premium of under £207 for buildings cover shows little change over the past year. Contents insurance fell by just over 1 per cent to £147.

Car Premiums: brakes off again

Over the past 12 months, the average index figure for comprehensive car has risen by nearly 8 per cent, despite a slight fall over the previous quarter. The past quarter saw a 2.5 per cent rise with the Index figure now standing at £822.47.

Non-comprehensive insurance also rose, by 1.32 per cent, to its highest-ever index average of £1,006.44. This kind of cover is typically bought by young and inexperienced drivers with little no-claims bonus and premiums reflect this.

"There is still a large gap between premium income and the cost of claims so I'm not surprised to see the generally upward trend of the previous year resuming. I think this trend is likely to continue," says Kevin Sinclair, managing director of AA Insurance.

Comprehensive car insurance

  • Over the second quarter of 2007, the index of average quoted premiums rose by 2.5 per cent to £822.47 (down 0.41 per cent to £802.44 over the previous quarter)
  • Premiums have risen by 7.84 per cent year-on-year
  • The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) rose by 2.15 per cent to £477.89

Third party, fire and theft insurance

  • The index of average quoted premiums rose by 1.32 per cent to £1,006.44 (down by 0.62 per cent to £993.28 over previous quarter)
  • Premiums have risen by 5.48 per cent year-on-year
  • The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) rose by 1.03 per cent to £553.33

Home insurance premiums drift

Heavy discounting and good quoted results are keeping the lid on both buildings and contents cover and as a result, recent premium increases have been cancelled out. However, Kevin Sinclair doesn't believe the recent widespread flooding will necessarily signal an immediate rise in home insurance premiums.

"It will take a sharp increase in the number of extreme weather events of the sort we have seen in Yorkshire and the Midlands to have an impact," he says

"But I am concerned at the number of people counting the cost of the recent floods who say they had no contents cover while many industry experts believe that up to two thirds of those who do have cover are under-insured. Recent events show that severe weather can affect anyone so while premiums remain low, it would be a good time for people to review their home insurance."

Home buildings insurance

  • Over the first three months of 2007, the index of average quoted premiums fell by 1.89 per cent to £206.68 (over previous quarter: down by 0.78 per cent to £210.66)
  • Premiums have fallen by 0.20 per cent year-on-year
  • The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) fell by 3.45 per cent to £137.40

Home contents insurance

  • The index of average quoted premiums fell by 1.32 per cent to £147.14 (over previous quarter: up by 1.26 per cent to £149.13)
  • Premiums have fallen by 3.22 per cent year-on-year
  • The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) fell by 3.37 per cent to £81.13

"Home insurance represents particularly good value having changed little over the past decade and while the trend of car insurance is firmly upward, there are still deals to be had," adds Kevin Sinclair: "Things have never been better for customers in terms of choice but make sure you're comparing like for like and not just price for price."

Notes to editors

Media information: Ian Crowder, 01256 492844

View the full report, tables and graphs

The Index (the benchmark of 100 was set at July 1994)

The quarterly AA British Insurance Premium Index tracks the movement of home insurance on 500 risks each for buildings and contents, and on 500 car insurance risks - 404 comprehensive and 96 non-comprehensive.

The Index shows average quoted car insurance premiums based on open market rates from 51 of the UK's leading insurance schemes and home premiums across 34 schemes. Composites, direct writers, brokers and online providers are included. The 'annual shift' compares the market average premium this quarter with the same quarter last year.

The 'Shoparound' premium is the average of the three lowest premiums quoted by the insurers in the market survey. This more closely reflects the price typically paid by customers, taking into account fixed discounts (such as for online arrangement) but not discretionary discounts that might be offered.

 

2 July 2007