Price increases in certain segments of the UK car insurance market have offset decreases in others to edge the average comprehensive premium upwards for the first time since mid- 2011.
The average cost of a new comprehensive motor insurance policy in the UK rose by a fraction in the third quarter of 2014 to £582, according to the Confused.com Car Insurance Price Index in association with Towers Watson.
Despite small overall quarterly rises of 0.4% and 0.2% for comprehensive and third party, fire and theft (TPFT) policies respectively between June and September-the first increase since the middle of 2011 in the case of comprehensive cover-price movements within the quarter affected consumers in different ways. This is likely to fuel the intense recent speculation about when the market pricing cycle may or may not turn.
Drivers aged below 25, who have been the greatest beneficiaries of premium reductions in recent quarters, generally saw the largest and most consistent increases in the quarter–drivers aged 19 or 20, for example, saw increases of around 3.0%, whereas drivers in their mid-40s enjoyed further price cuts, ranging from around 1% up to 2.8%. Policies having insured only driving were also a focus of premium increases, averaging 1.8%, whilst prices for multi-driver policies continued on a mild downward trend.
Stephen Jones, UK head of P&C Pricing at Towers Watson, comments “The latest quarter has provided a real mixed bag of modest up and down pricing impacts on consumers, making it difficult to call how and in which general direction prices might move next. One additional factor to take into account will be insurer reaction to the Competition and Market Authority(CMA) decision at the very end of the third quarter not to address the issue of temporary car replacement costs. Some insurers may have been anticipating favourable reform to support premium rates impacted by general inflationary pressures.
Recent price cuts were heavily predicated on third party injury claims costs reducing as a result of the LASPO reforms, but the last few months have seen the number of claims notifications to the Claims Portal creeping up again. Insurers will need to watch this and their own developing claims experience when adjusting new and renewal policy prices over the coming months.”
Steve Sanders, Finance Director at Confused.com,added “The decreases in car insurance premiums that we’ve been experiencing for the last three years have been welcome news for motorists, however over recent months the heat has certainly come out of these price reductions. Our latest figures suggest that these price drops are now levelling out, with premiums actually rising over the last quarter to now stand at £582. Although this is just a marginal quarterly increase of £3, this is the first time premiums have increased since June 2011.
With prices shifting around either way, as they have been over the last quarter, we’re urging consumers to shop around and compare prices using Confused.com to ensure they get the best deal possible.”
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