Although the latest quarterly price movement represented a slowdown from the 6.5% increase in the previous quarter, the average UK comprehensive premium has increased by over £100 (17.3%) in the past year to £737. Third party, fire and theft policies, while subject to a more moderate 1.7% increase in the quarter, have also risen by over 18%, or nearly £200, in the last 12 months.
Stephen Jones, UK Head of P&C Pricing at Willis Towers Watson, commented: “The primary forces behind recent increases are repair costs driven by legal rulings about recoverable expenses together with increasing vehicle complexity.”
The cost of making repairs to increasingly technology-laden vehicles has translated into relatively higher percentage increases for many older drivers, who are statistically more likely to drive higher specification cars and whose accidents can involve a higher proportion of costs relating to vehicle repairs. A large proportion of drivers over 40 have experienced price increases exceeding 20% in the last year. But their premiums still compare very favourably with drivers of 25 and under for whom they exceed £1,000, rising to an average of £2,106 for 18-year-olds.
Nonetheless, 17 and 18-year-olds are the only groups to have received increases below 10% in the past 12 months, thanks significantly to the effect and increased availability of telematics policies at this end of the market. For example, analysis by Confused.com has shown that telematics brands now provide the cheapest quote to 17 to 24-year-olds in over 60% of instances and account for about a quarter of sales to this age group.
Stephen Jones noted: “For insurers that wish to compete in the very young driver market, these figures demonstrate that an attractive telematics-based policy option is becoming a must.”
Across the regions of the UK, an 8.6% quarterly increase for drivers in the Scottish Borders has contributed to a national high annual premium increase of over 23% - although the average premium of £520 remains the lowest of any region in the country. Outside London, and despite quarterly and annual percentage increases marginally below the national average, a typical premium exceeds £900 in two regions – Manchester and Merseyside and the West Midlands.
At postcode level, a handful of areas received small quarterly price decreases, including Paisley, Sunderland, Chester, Wigan and Dorchester. By contrast, areas where comprehensive premiums increased by more than double the national average percentage included Inverness, Dundee, Llandudno, Norwich and Exeter.
Steve Fletcher, Head of Data Services at Confused.com said: “With consistent price rises over the past year, car insurance premiums are creeping up. And with the Government’s increase in Insurance Premium Tax rising to 10 per cent this month, compared with six per cent this time last year, this inflation could reach the £858 average policy level we saw in 2011.”
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