Comprehensive car insurance premiums have continued to rise during the final quarter of 2015, with motorists now paying on average £78, or 13.2%, more than they were this time last year, according to the latest Confused.com Car Insurance Price Index in association with Willis Towers Watson. This represents a 6.9% quarterly increase (or £43) and the biggest annual rise recorded by the Index since 2011, which is based on price data compiled from almost two million customer quotes.
This latest increase means that the average premium for an annual comprehensive car insurance policy has now reached £672.
The cost of third party, fire and theft (TPFT) policies has risen at a similar pace, with prices also going up by 6.9% in the last quarter, increasing the average quoted premium by £73 to £1129 - an annual increase of 16.8%.
Following on from three years of falling premiums, the last 18 months have seen a steady increase in comprehensive cover prices, with figures from the Price Index+ service showing monthly price increases recorded in eight of the last ten months of 2015, including in each month in the fourth quarter, suggesting a prevailing trend towards higher premiums.
Stephen Jones, UK Head of P&C Pricing at Willis Towers Watson, said: “The recent increase to Insurance Premium Tax along with inflationary pressures on claims costs, especially to vehicle damage repair costs, have been the major factors driving up prices. Even though improved vehicle safety features will very likely reduce claims frequency in the longer term, the immediate effect of installing expensive accident avoidance technology – often positioned in those parts of the car most vulnerable to impact damage – is higher repair costs.”
Price increases in the final quarter in 2015 reflected a wide range of age, vehicle type, and regional premium movements. The latest quarterly results revealed that higher group vehicles continue to see the largest price increases, continuing a trend that began in the summer of 2015, although most lower group vehicles have also experienced a sharper rise compared to the previous quarter.
Younger drivers aged between 17 and 20 have benefited from the lowest increases in the last 12 months, with female drivers in this age group experiencing annual price rises of just 3.9% to £1558 for comprehensive car insurance. Almost every other age group has been affected by double-digit increases, with female drivers aged over 71 hit hardest with a 19% annual rise in prices to £360. Male drivers aged between 61 and 65 saw the biggest quarterly increase of 10.2% to £437.
Stephen Jones noted that the sector is still experiencing something of a market correction in premium relativities between different risk segments in response to measures designed to control compensation bodily injury claims costs, such as LASPO (The Legal Aid, Sentencing and Punishment of Offenders Act).
He said: “Young drivers are high bodily injury risks, so as measures to control these risks bite their prices will reduce relative to older drivers. This partly explains why younger drivers are once again coming off best, although inflationary pressures and the increase in repair costs have affected all ages. There is also an established correlation between older drivers and prestige vehicles, which have seen earlier adoption of some of the new technological systems, and have been especially vulnerable to repair cost inflation.”
The cost of comprehensive car insurance rose across all regions, but drivers in Northern Ireland were worst off with their insurance premiums rising on average by 18% over the last year, an increase of £125 to £810. More locally focused data shows drivers in Kirkwall and Dorchester were hit by the sharpest spikes in annual premiums, increasing by 25% and 22%. The region of Manchester and Merseyside was the only area to avoid a double-digit rise in prices, with the smallest annual rise of 9.9%, or £79 extra, to £887.
2015 has also been a record year for new car sales and low fuel prices, both factors directly contributing to more motorists and miles driven, and so more opportunity for accidents, with insurers having to increase premiums in response. More than 2.6m cars were registered in the UK in 2015, the highest number ever recorded and an increase of 6.3% since the previous year, according to the Society of Motor Manufacturers & Traders (SMMT).
Steve Fletcher, Head of Data Services at Confused.com, said: ““Last year gave motorists a tumultuous ride, hitting them with consistent price rises and an increase in Insurance Premium Tax, both of which would have considerably dented their pockets. We’re now in a position where average premiums are at the highest we’ve seen them since mid-2013.
“Unfortunately for motorists, we’ve now seen 11 consecutive months with no premium decreases, which would suggest that the trend is likely to continue. If this is to be the case, we would expect the average comprehensive cover premium to soon exceed the £858 per year high we saw during 2011.”
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