This latest increase means that the average premium for an annual comprehensive car insurance policy has now reached £629. Third party, fire and theft (TPFT) policies have also become more expensive, with a 7% quarterly price rise increasing the average quoted premium by £69 to £1056, which represents an annual increase of more than 10%.
After enjoying three years of falling premiums, the last 12 months have seen a steady increase in comprehensive cover prices for motorists, with figures from the Price Index+ service showing monthly price increases recorded in five of the last seven months, including each month in the third quarter, suggesting that the trend towards higher premiums is now well-established.
Price increases in the third quarter in 2015 reflected a wide range of age, vehicle type, and regional premium movements. The latest quarterly results revealed that higher group vehicles saw the largest price increases, continuing a trend established earlier in 2015 and reversing the patterns seen throughout 2014.
Across the UK regions, drivers in the West of England have seen the largest average annual rise in premiums at around 12%, followed by those in the East and Northern Ireland, both at 11%. More locally-focused data shows drivers in Llandrindod Wells were hit by the sharpest spike in annual premiums, which increased by 17%. In contrast, Sunderland is the sole location in the whole of the UK to have benefited from falling premiums over the last 12 months, with a very modest 0.3% drop in prices.
Younger drivers have seen lower increases than older age groups when changes are considered on an annual basis, although increasing trends appear well established across all age groups. For example, prices have increased in the last 12 months by around 5.7% for drivers aged between 25 and 29, but by around 9.7% for drivers aged between 50 and 59.
Stephen Jones, UK Head of P&C Pricing at Towers Watson, noted that the rate of quarterly premium increases exceeded that experienced for almost five years and is broadly based: “The main story here is around a widespread market reaction to increasing claims costs, especially own vehicle damage claims. There’s been close attention given to premium change metrics during 2015 as the market has looked for signs that the trend of increasing prices has become established. Our monthly price index has shown rises now for five of the last seven months and, except for small market segments, finding reductions over the last 12 months is becoming increasingly difficult.
Stephen Jones commented: “New technology such as telematics has helped to moderate premium increases for young drivers, as has a gradual return in the confidence of motor underwriters to compete for business in some segments of the market particularly impacted by Third Party Bodily Injury (TPBI) problems prior to the LASPO (The Legal Aid, Sentencing and Punishment of Offenders Act) reforms. This shift in sentiment has led to much greater competition for some risks, including young driver business, than was evident during the depths of the bodily injury claims crisis.
“For all the talk of driverless cars, the effects of the creeping uptake of driver assist technology is yet to impact materially on premium levels driven by established cyclical and inflationary trends. The increase in Insurance Premium Tax due in November will, of course, compound the effects of these trends on prices.”
Steve Sanders, Finance Director at Confused.com said: “It would seem that the days of cheap car insurance really are over – just like 6 years ago we’re seeing substantial increases in prices for most UK motorists. And with the Government’s increase in insurance premium tax, rising from 6 to 9.5 per cent this November, we’re likely to see continued inflation in car insurance prices across the rest of 2015, and into 2016.”
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