Motor insurance cost increase in reverse, finds Consumer Intelligence

A 9.6 percent increase in motor insurance costs has been reversed over the past three months, Consumer Intelligence has found.

The research firm found that the average most competitive premiums rose by three times inflation—3%—to £837, but overall prices dropped in Q4 2017.

A government review of the personal injury discount rate has enabled insurers to reverse rises, according to Consumer Intelligence, which added that confirmation of the new rate of between 0% and 1% could spell further cuts.

Average premiums dropped by 1.7% in the three months ending December, with under-25s benefiting the most. Their average premiums are up just 2% in the past year to £1,953.

Technology played a significant role in the fortunes of younger motorists, with telematics limiting their insurance bills. Around 59% of the most competitive quotes are from telematics providers.

Over-50s drivers are experiencing the biggest increases in premiums at 11.8%, according to Consumer Intelligence, but they still pay average prices of just £395 a year.

Motorists in London pay the highest premiums at £1,217, which is more than double the cheapest at £606 for Southwest England.

John Blevins, a pricing expert at Consumer Intelligence, said: “The discount rate review and no rise in insurance premium tax in the last budget is a welcome relief for drivers. Further price cuts are possible when the new discount rate is set. The challenge is determining when that might be.”

“Average premiums, however, are still 9.6% higher than a year ago, with the discount rate and tax rises the main drivers—but it is not all about the government.”

Blevins explained: “Increased theft claims last year are driving price rises and the weakness of the pound means importing parts costs more. Price differences around the country are being determined by the cost of claims, and the same applies to price rises for the over-50s.”

The Consumer Intelligence research tallies with the Association of British Insurers’s (ABI) latest Premium Tracker, which found that the average motor insurance policy cost an extra £40 in 2017, a rise of 9% and a record high.

The ABI’s Premium Tracker—and the association’s insistence that “changes to how compensation pay-outs are calculated, insurance premium tax, more whiplash-style claims and rising repair bills are all piling on the pressure for cash-strapped drivers”—prompted a heated response from First4Lawyers managing director Qamar Anwar.

He said: “You have to give the ABI credit. It gets away with blaming others for rising motor insurance premiums, while insurers’ profits, dividends and senior executive pay spiral ever upwards. They blame whiplash claims—which the ABI’s own figures show have been falling for some years—they blame a government change that ensures severely injured people get the compensation they need, and they blame rising tax rates.”

Anwar pointed out: “Never do they think that insurers could use some of those profits, which collectively run into billions, for the benefit of their customers, rather than their shareholders.”

“The ABI has created a narrative that lawyers are to blame, and it is all too easy for others to jump on the bandwagon. But it is insurance companies that have the power to make things better for motorists, but it seems they have other priorities.”

Mark Dugdale