According to the Index, which is based on price data compiled from almost two million customer quotes, these results represent a 4.1% quarterly increase (or £30). This compares with the 6.9% quarterly increase (£43) for the same period in 2015.
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 of 2016. According to Willis Towers Watson, although these latest quarterly figures suggest a continuing upward trend for 2017, they also indicate a possible slowdown in the actual rate at which premiums are rising.
Stephen Jones, UK Head of P&C Pricing at Willis Towers Watson, commented: ”It’s not unusual for price increases to soften around the end of the year, with an annual increase of 14% in the final quarter of 2016 compared to the 19% rise we saw six months earlier. However, the lower Q4 increase relative to that in 2015 may herald something of an underlying slowdown in the rate of premium increases seen following recent exceptional influences on repair costs. In 2017, however, repair cost inflation is expected to remain an influence on premiums, especially given exchange rate movements following the Brexit vote and that insurance premium tax will increase from 10 per cent to 12 per cent in June, further pushing up costs for consumers.”
The increase in the fourth quarter of 2016 means that the average premium for an annual comprehensive car insurance policy has now reached £767. The cost of third party, fire and theft (TPFT) policies has risen at a similar pace, with prices going up by 4.7% in the last quarter, increasing the average quoted premium by £59 to £1311 - an annual increase of 16.1%.
Price increases in the final quarter in 2016 affected all vehicle types and reflected a wide range of age and regional premium movements. The cost of comprehensive car insurance rose across the UK with every region experiencing double digit increases. Drivers in the East and North East of Scotland were worst off with their insurance premiums rising on average by 20%, an annual increase of £94 to £563. More locally focused data shows drivers in Swindon were hit by one of the highest increases in England, by 21% to £592, compared with Uxbridge which experienced the lowest annual rise of 5% to £1266.
Younger drivers aged between 17 and 20 have continued to benefit from the lowest increases over the last 12 months. 18-year-olds experienced the lowest annual increase of 4.7% to £2109 whilst almost every other age group was affected by double-digit increases in 2016. In the last three months, male and female drivers over 71 were hit significantly harder than any other age group, experiencing 10.4% and 11.7% quarterly rises respectively – 3.4 percentage points higher than the next highest age group.
The number of cars sold in the UK hit an all-time high in 2016, with more than 2.69 million cars registered last year, according to the Society of Motor Manufacturers & Traders.
Stephen Jones noted: “Although a slowdown in sales is expected in 2017 in response to the weaker pound driving up the cost of imported models, these latest record figures directly contribute to more motorists and miles driven, and so greater opportunity for accidents. This, combined with the further insurance premium tax increase, will put pressure on insurers to increase premiums in response during 2017.”
Steve Fletcher, Head of Data Services at Confused.com said: “Although the increase isn’t as drastic as the last time the industry went through rapid price rises, it is still expected to continue climbing.
“There are new highs for third party, fire and theft cover while comprehensive has remained steady. This, coupled with insurers now having to remind customers what they paid at their last renewal, should mean 2017 is set to be a bumper year for new business originating through price comparison sites like Confused.com.
“Customers who have or are considering third party, fire and theft insurance may want to investigate the cover levels provided by a comprehensive policy at the same cost.”
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