AA index reports fall in car insurance costs

The average price for a comprehensive car insurance policy has fallen for the third consecutive quarter, as insurers react to anticipated government reform of spurious claims activity, according to the latest AA British Insurance Premium Index.

Car insurance premiums peaked in Q2 2017 but have fallen steadily since, to a ‘shoparound’ level of £660.64, which is 0.7% or £4.83 cheaper than this time last year, and 2% or £13.42p less than Q4 2017.

Michael Lloyd, director of AA Insurance, pointed to the recently introduced Civil Liability Bill, as well as plans to ban claim management companies from cold calling, as the reason for the fall.

He said: “This is a glimmer of good news for drivers who are facing rising fuel prices and increased vehicle tax rates. Insurers’ confidence in offering lower quotes is further boosted by the government’s Civil Liability Bill to review the so-called Ogden or ‘discount rate’, which affects the value of compensation payouts to injured victims of car crashes. This will particularly affect premiums for young drivers who tend to be involved in more catastrophic crashes, and pay much higher premiums, than any other age group.”

On cold calling, Lloyd said: “We’re receiving a lot of messages from concerned AA members saying that someone is calling them claiming to be from the AA ‘about an accident you had that wasn’t your fault’, and saying they could get big payouts for a whiplash injury. These cold calls certainly do not come from the AA. They come from apparently ordinary telephone numbers to get around ‘withheld’ call blockers, but if you call back the number goes nowhere.”

“This underlines the disgraceful underhand nature of such firms, who if successful in making a claim against a third-party insurer stand to earn thousands of pounds in legal fees and costs, on top of a compensation payment for the victim. This must be stopped, and I welcome moves in the bill to stop such practices which are already on the borderline of legality. It is in the interest of every driver that this whiplash culture is stamped out.”

The Civil Liability Bill is now going through Parliament. If it becomes law in the autumn, it should be a big step towards stamping out spurious whiplash injury claims and cold-calling by claims management companies, according to Lloyd.

He added: “In the competitive car insurance market, firms including the AA will pass on the savings they make in the premiums for customers, which the government suggests could be on average about £35 less.”

Association of Personal Injury Lawyers president Brett Dixon recently criticised the saving pledge, using his annual conference speech to point out that the “princely sum” off the cost of annual car insurance policies is tantamount to “a round of beers in the hotel bar”.

The AA’s explanation for the fall in cost tallies with Confused.com’s latest price index, although that reported an average £13 drop during the first three months of 2018.

The price comparison site’s car insurance price index for the first three months of 2018 revealed the 2% percent fall, with UK drivers now paying £768 on average for an annual car insurance policy.

Willis Towers Watson uses more than six million quotes to compile each quarter’s insurance price index on behalf of Confused.com, while the AA’s index is an average of the five cheapest premiums, quoted from the broker, the direct market and price comparison sites, for each risk in a nationwide basket of risks representative of the insurance buying public.

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Mark Dugdale