After a brief hiatus in the first quarter of 2015, new motor insurance policy premiums rose in the second quarter, picking up where they had left off at the end of 2014
This means that the average quoted premium for an annual comprehensive car insurance policy now stands at £600 in Q2 2015, compared to £579 in Q2 2014.
Third party, fire and theft (TPFT) policies have also become more expensive, with a 2.4% quarterly price rise increasing the average quoted premium by £23 to £987.
Motorists had enjoyed three years of continually falling premiums, however the last 12 months have seen a steady increase in prices, equating to an annual increase of 3.6%, and a most recent quarterly increase of 1.5% (£9). The latest rise continues a previous run of two successive quarters in 2014 when average prices went up after a brief pause in the prevailing rising trend during Q1 2015.
However, whilst drivers across the UK are facing both quarterly and annual price hikes, younger drivers (aged 17) still have reason to rejoice, as their premiums have in fact fallen year on year, by 6.4% (£127), and quarterly by 1.7% (£31).
As a result, 17 years old drivers are now enjoying their lowest ever premiums, with the average annual comprehensive car insurance policy for this age group now standing at £1,869 – 50% less than in Q3 2011 when their policies were a staggering £3,729 on average.
Although it’s a different story for the older generations, with motorists in their sixties facing the greatest average increase over the last 12 months of 5%, bringing their premium up to £384, compared to £356 in Q2 2014.
The South and South East of the UK are also bearing the brunt of rising insurance prices, with annual price increases of 6.9% and 7.2% respectively. And whilst the South as a whole has experienced price rises, some cities in these regions have seen larger increases than others. Drivers in Bournemouth have seen their policies increase annually by 9.2%; with motorists in nearby Southampton experiencing price rises of 7.8% over the year.
However, some regions are also continuing to benefit from falling premiums, albeit minimal, with motorists in Manchester/Merseyside and the North West experiencing the only annual price drops of -0.5% and 0.2% respectively. The only UK region to experience any significant quarterly decreases in prices was the Scottish Borders, where premiums fell by 3.3% over the quarter, saving motorists £13.
Karl Murphy, UK property and casualty insurance leader at Towers Watson, noted that improving economic conditions could be a double-edged sword, with increasing new car sales and road usage directly impacting on higher accident levels and claim figures, pushing insurance premiums steadily upwards.
Motor vehicle usage levels reached a total of 312.4 billion miles in the year ending March 2015, an increase of 1.8% compared to the same period in 2014, according to the Department for Transport.
Karl Murphy said: “Without doubt, the biggest pricing issue for motor insurers is the level of claims and how, potentially, regulation and a generally improving national economy may affect this.
“There is real uncertainty surrounding future claims levels, particularly those involving minor bodily injuries, such as whiplash.
The number of claims made every month for the last 12 months have exceeded the previous year, casting doubt on the effectiveness of The Legal Aid, Sentencing and Punishment of Offenders Act since it was introduced two years ago to reduce personal injury claims.”
MedCo, which went live in April, is the government’s latest system to reduce fraudulent claims and requires independent medical reports in whiplash claims to deter cheats and ensure honest motorists continue to get competitively-priced car insurance.
Karl Murphy commented: “It is too early to say whether MedCo is the white knight riding to the aid of motor insurers, but the industry will be hoping that it offers some respite from claims levels that have spiralled in recent years.”
Steve Sanders, Finance Director at Confused.com said: “We’ve seen insurance premiums fall steadily over the last few years, which has been welcome news for motorists, however it looks like the end of the road for continuing price drops. Despite enjoying a brief reprieve in the first quarter of 2015, market movements in the last 12 months suggest consumers should prepare themselves for price rises to continue for the rest of 2015. The last time we saw this sort of premium change pattern we were at the beginning of three years of consecutive comprehensive premium increases
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