General Insurance Article - Motor insurance premiums to soar to over £700 by end of 2016

 The latest Premium Drivers Index, which analyses the difference between the “average”* and the “cheapest”** motor insurance premiums – known as the savings variable –, has found that the quarterly cost difference between the cheapest and average premiums on the market has grown to £118 between June and August 2016 – the greatest gap since records began. The average premium between June and August 2016 cost £697, up from £679 in the previous quarter and from £605 year on year – an annual rise of £92.The cheapest policies averaged over the quarter and across age groups have also seen an increase, rising from £510 to £579 in the last twelve months.

  

 A rise in incidents such as staged car crashes, rising repair bills and insurance scams are just some of the reasons why premiums have risen as insurers look for ways to absorb increased costs. The significant increase in Insurance Premium Tax introduced over the past year has also contributed to pushing up the price.

  

 Historically, between the Premium Drivers Index’s Q3 (June, July, August) and Q4 (September, October, November) average premiums have risen by nearly 6%. Assuming the same trend occurs this year, drivers who automatically renew their policies with the same provider could see their annual motor insurance costs rise by £41 to £739.

  

 However, even for those savvier drivers who compare different policies before buying, it is still going to be a tough time. The cheapest premiums on the market increased by 5% on average between Q3 and Q4 over the past few years. Even the cheapest premiums could grow by around £30 and may cost over £600 (£609) by the end of 2016. For the past six months, the cheapest premiums on the market have been more expensive than the average premiums available when Premium Drivers records first began in 2012.

  

 Despite a few years of rising premiums and what appears to be an ever hardening market, there are some upsides. The predicted rise in prices means even higher potential savings, and analysis suggests that if premiums increase as expected then drivers could stand to save an average of £130 by shopping around by the end of the year, nearly £12 more than the available savings in this last quarter.

  

 Dan Bass, head of motor insurance at comparethemarket.com said: “2016 has been tough for British drivers, with premiums rising consistently throughout the year. When you consider that the quarterly “switching saving” for the same period in 2013 was only £78 – rather than £118 today – it becomes easier to see how the cost of insurance has been driven up over the years and motorists’ pockets have taken a serious hit.

  

 “Previous data suggests that we can expect to see a rise in motor insurance throughout the rest of the year. There are a number of factors contributing to this rise, but clearly insurers are not feeling any competitive pressure to reduce their prices.

  

 “But it’s not all doom and gloom. The bigger the difference between cheapest and average premiums, the greater the saving to be made by shopping around. A difference of nearly £130 a year is something most drivers can’t afford to ignore. The fact remains that shopping around for insurance is the most effective way to reduce your annual motoring costs. It keeps competition levels high and premiums as low as possible for all age groups.”