The average cost of a new comprehensive policy fell by just 0.5% in the quarter, dropping by £3 to £591. Third party, fire and theft (TPFT) policies likewise became slightly cheaper with a 0.3% price drop reducing the average premium by £2 to £964.
However, Stephen Jones, UK Head of P&C Pricing at Towers Watson, noted that the underlying price trend remained steadily upwards, with average comprehensive premiums having risen by £12 (2.0%) since the middle of 2014 and in five of the last seven months.
He said: “Price movements in the driver’s favour are typical in the first quarter of a calendar year as insurers seek to get their new business performance off to a good start and to position themselves for the peak new car registration and insurance renewal month in March. In five of the previous six years, and so across much of the underwriting cycle, the quarterly price movement has been lower in the first quarter than in the immediately preceding fourth quarter.
“In order to fully understand the seasonal effect, it is necessary to look at the monthly price movements. In January, comprehensive premiums fell as consumers checked prices for planned March new car purchases, after which prices were broadly flat in February and then rose again in March.”
New car registrations reached nearly half a million in March 2015, the 37th consecutive month of sales growth and 6% up on the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT). In addition, the Department of Transport recorded that overall road traffic rose by 2% and road casualties by 5% in the year to September 2014.
Stephen Jones commented: “Without dismissing the fact that there are companies out there prepared to compete on price, the upwards price movement in March looks more consistent with many insurers’ stated longer term aims of seeking to restore profitability in their motor business after around three years of intense price competition between mid-2011 and mid-2014.
Continuing lower fuel prices and rising traffic and road casualty levels would all suggest that higher claims levels are on the way.”
Within the small overall quarterly price decreases, regional discrepancies were significant. Drivers in the East Midlands enjoyed an average 2.3% saving in the quarter compared to those in the Scottish Borders who saw a 2.8% increase. Similarly, at postcode area level, new comprehensive policyholders in Hereford paid 4.9% less at the end of the quarter while drivers in Redhill paid 7.8% more.
Steve Sanders, Finance Director at Confused.com said:
“It’s good news for motorists that car insurance prices didn’t increase at the start of the year. This, coupled with the lower petrol prices that we’ve been seeing, means that drivers across the UK have been provided with some welcome relief.
“However, the Index results that we’ve seen over previous quarters indicate an underlying gradual increase in premiums, with monthly figures showing prices rising in five of the last seven months. Based on the market movements we’ve been seeing over previous quarters, we’d expect to see these gradual increases return in the coming quarters, growing in size and frequency as the year develops.
“So, while consumers will be pleased not to have seen any rises this quarter, they should prepare themselves for the possibility of a return to the gradual increases we have been experiencing in previous months, as seasonal pricing patterns balance out.”
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