This latest quarterly increase represents the third rise in prices in the last 12 months and, following a period of price cuts from Q3 2017 to Q2 2018, indicates premiums are likely to continue their upward trajectory in 2019, according to the longest established and most comprehensive car insurance price index in the UK, which is based on price data compiled from almost six million customer quotes per quarter.
Graham Wright, UK Lead of P&C Personal Lines Pricing at Willis Towers Watson, commented: “Hikes to Insurance Premium Tax and changes to the personal injury discount rate have been key drivers behind prices fluctuating up and down over the last two years. With the implementation of whiplash reforms now delayed until April 2020, to allow testing of the new online portal for motor claims, underlying cost pressures on premiums look set to continue for some time.”
The cost of comprehensive car insurance rose across the entire UK, with three regions experiencing a quarterly increase greater than 5%. Drivers in Inner London were hit hardest, with their insurance premiums increasing on average by £61 to £1214, followed by quarterly rises in the North Midlands (£37 to £756) and in the North of England (by £35 to £722). The smallest quarterly increase of 0.5% was seen in the Scottish Borders, marginally increasing average annual premiums to £582, while the South West remains the cheapest region for car insurance, which on average costs £572.
More locally focused data shows that drivers in Llandridod Wells in Wales, previously the cheapest town in the UK for motor insurance, experienced the sharpest rise in prices at 27%, taking their premiums from £542 to £688[1]. Dorchester is now the location offering the best value for car insurance, with drivers in that postcode paying an average of £542 in the last three months. At the other end of the spectrum, East London is the most expensive place in the UK to buy car insurance, with drivers now paying £1383 to buy car insurance.
Drivers across all ages experienced an increase in prices. Female drivers aged over 71, who benefited most from a price drop in the first quarter of 2019, have seen their premiums swing most sharply in the other direction with a quarterly rise of over 8% in the last three months and over 10% since the same period in 2018, taking their annual premiums to £449. Male drivers aged between 61 and 65 experienced the smallest quarterly rise, with a 1% price increase, taking their annual premiums to £515.
Graham Wright noted: “In addition to delays to the whiplash reforms, adjustments to insurer pricing strategies against a backdrop of potential regulatory intervention, together with ongoing claims inflation pressures driven by wider economic uncertainty, are likely to be further factors behind the recent movements.”
Steve Fletcher, Head of Data Insight at Confused.com comments: “This is the first time we have seen car insurance prices increase three months in a row since the Odgen rate change in 2017. There’s a few reasons why they could be accelerating in an upward direction. Aside from the ongoing economic uncertainty we’re all facing and further changes to the Ogden rate, the industry was hit by a super complaint into unfair renewal pricing earlier this year. This means insurers will be looking at how they price for new customers.”
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