Prices fell by 2% (£16) in the last three months, according to the most comprehensive car insurance price index in the UK, which is based on price data compiled from almost six million customer quotes per quarter. This also means that prices have now fallen for the fourth quarter in a row, since prices peaked last summer at £847.
According to Willis Towers Watson, the reduced prices this quarter continue to reflect the perceived uplift in market prospects shared by motor insurers based on the anticipated government changes to the Ogden rate used to calculate lump-sum compensation payments for personal injury claims, allowing insurers to price in future reserve releases which are currently set aside for higher claims.
Graham Wright, UK Lead of P&C Personal Lines Pricing at Willis Towers Watson, commented: “On the back of a positive 2017 for the UK private car market, insurers remain sufficiently confident of profitability, partly buoyed on by the anticipated changes to the Ogden rate and the upcoming government reforms.”
With the exception of the Scottish Highlands and Islands, where premiums bucked the downward trend by increasing on average by 1% in the last three months, the cost of comprehensive car insurance fell across all other regions in the UK. Drivers in Northern Ireland were best off with their insurance premiums decreasing on average by 4.3% to £894, followed by a 3.5% drop in prices in the East Midlands to £716.
More locally focused data shows drivers in Kirkwall benefited from the greatest quarterly fall of 9.3% (£582), followed by those in St Albans with a cut of 7.8% (£738). Despite a £14 quarterly price drop, East London remains the most expensive location in the country for car insurance, with motorists paying on average £1,345. The cheapest places for motor insurance in the UK are Dorchester and Llandrindod Wells, where drivers were paying an average of £522 in the last three months.
These price reductions were reflected across most age groups, with drivers at both ends of the age spectrum benefited most from the downward trend in prices, with those aged 68 benefiting from a quarterly cut in premiums of 8.7% (£496) and 17-year-old drivers receiving a welcome 5.7% fall in prices (£1,889). Female drivers aged between 61 and 65 are paying the least and less than half the national average, with a bill of just £356.
Graham Wright noted: “Insurers have enjoyed one of the best underwriting results since the mid 1990s, however conditions are likely to get tougher this year. Increasing competition for market share, combined with falling premiums, will begin to bite. These challenges come on top of the ongoing pressures on repair costs and the continuing prioritisation of Brexit, which risks pushing back further the introduction of a new discount rate, currently timetabled for April 2019.”
Steve Fletcher, head of data insight at Confused.com, said: “While prices are continuing to drop, they are doing so at a much slower rate than the last quarter. This suggests there appears to be a correcting of the steep increases we saw this time last year, where insurers increased their premiums following the change to the Ogden rate. What we are now seeing is the plateauing of increases over the past three years, and potentially the home-coming of a period of steadily decreasing premiums.”
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