Now the good news: car insurance premiums are falling

18135851At a time when many people are struggling to make their motoring ends meet, with rocketing fuel and parking costs making the headlines, it’s good to discover that car insurance costs at least seem to be falling.

In fact, the AA’s latest quarterly British Insurance Premium Index shows that the average Shoparound quote for an annual comprehensive car insurance plummeted to £594.86, down a record 9.8% from £659.53 in July 2012.

Biggest premium drop ever

Simon Douglas, director of AA Insurance, said: “This is the biggest drop we’ve ever seen across the Index, which started tracing car insurance movements in 1994 and it follows a generally downward trend over the past 18 months.”

The Shoparound index is an average of the five cheapest quotes for each in a nationwide basket of ‘customers’, taken from insurance companies, brokers and price comparison sites.

But Mr Douglas points out that premiums are still getting on for double what they were before 2007.

“Insurers were facing a fast-widening gap between premium income and claims costs, largely driven by whiplash injury claims and fraud which saw very sharp premium increases between 2009 and 2011,” Mr Douglas said.

“That gap diminished and competition has started to force premiums down. Not only that, improved fraud detection by the insurance industry and tightening of the law that is beginning to curb the number of spurious new whiplash injury claims is being reflected in premiums.

“I hope that Britain’s shameful reputation as being the ‘whiplash claim capital of Europe’ will now be put behind us.”

Tough challenges ahead, still

However, Mr Douglas says that the motor insurance industry still faces many challenges: for example bringing down the high frequency and cost of crashes involving young drivers and uninsured driving.

He also points out that the gender-neutral insurance environment, following a European Court of Justice ruling which came into effect last December, has seen premiums for young men falling while those for women have either remained static or have risen but by much less than expected.

“The background of falling premiums has helped insurers to more effectively manage the premium gap between men and women, although young drivers have fared least well. Some new and young women drivers will have seen a premium increase, even after taking their no-claim discount into account.”

Mr Douglas points out however, that the averages quoted in the Index are just that and when choosing a car it’s important to keep in mind the likely insurance cost.

“While we expect premiums to continue falling there are still winners and losers. While many will see welcome reductions in the cost of their cover, others are likely to find their premiums go up – it all depends on the way your insurer assesses the risk your cover presents.”

Winners and losers

All ages have on average, seen significant premium falls over the past year but those between 23 and 29 have seen the biggest fall, at 12.8% (to £738.93). The smallest fall was among drivers aged over 70 at 3.9% (to £407.70)

Regionally, areas that have seen the highest activity from claims management companies have seen the biggest quarterly percentage drops: the North West 4.4%, followed by London, 3.5% and the North East 3.2%.

* Ban of referral fees other measures introduced by the Ministry of Justice, has led to a reduction in the number of claims management firms from 2,435 in March 2012 to 1,700 in June 2013. Source: BBC



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