According to the Index, which is based on price data compiled from almost two million customer quotes, the benefits of a 1.8% month on month decrease in January were swiftly cancelled out by a 3.5% rise in March. According to Willis Towers Watson, the government’s decision in February to cut the personal discount rate from plus 2.5% to minus 0.75%, with effect from 20 March, will have been a key factor behind the sharp turn around in the direction of rates.
The first three months of 2017 saw a 1.8% (£14) quarterly increase due to the impact of the Ogden changes, which contrasts with the same period in 2016 when the rising cost of motor insurance stalled for the first time in a year. Comprehensive cover prices have been steadily increasing since 2014, with figures from the Price Index+ service showing monthly price increases recorded in 10 of the last 12 months.
Stephen Jones, UK Head of P&C Pricing, Claims and Underwriting at Willis Towers Watson, commented: “We have seen decreases every January in the last four years, even during the upward trend from mid-2014 onwards, which in the past seem to have been largely driven by price competition between insurers during the renewal season in order to meet volume targets. If it were not for the January reductions, the immediate impact of the Ogden rate cut would have been far more painful for motorists in the first calendar quarter.”
Meanwhile, the cost of third party, fire and theft (TPFT) policies has risen sharply compared to the same period in previous years, with prices going up by 7.9% in the last quarter, significantly increasing the average quoted premium by £103 to £1414 - an annual increase of 25.4%.
The cost of comprehensive car insurance rose across the UK with most regions experiencing a quarterly increase, with drivers in Greater Manchester and Merseyside worst off with their insurance premiums rising on average by 3.8% to £1034. More locally focused data shows drivers in Gloucester were hit by the highest quarterly increase in England, by 8% to £614, compared with Galashiels in the Scottish Borders which experienced the biggest drop in average prices of 8.7% to £525.
Annual growth in the UK car market of 8.4% in March 2017 made it the most successful month ever for new car registrations, with a total of 562,337 new cars registered, according to the Society of Motor Manufacturers & Traders.
Stephen Jones noted: “The latest results from the Index also show premiums have increased for newer and higher value vehicles, especially brand new ones which are increasingly technology-laden and as a result can cost more to repair.”
Steve Fletcher, Head of Data Services at Confused.com said: “Drivers across the UK are seeing car insurance prices accelerate and there seems to be no signs of slowing. With prices having risen 16% annually, the average driver is now paying a whopping £781 for their premiums - £110 more than they were paying this time last year.
“And as the industry adapts to additional pressures, such as the drastic Ogden rate cut and the hike in IPT to 12% from June this year, we could be on course to drive past the £858 peak we saw in 2011. As car insurance costs continue to climb, average premiums could even break the £1,000 barrier by next year.
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