CAR INSURANCE PREMIUMS CONTINUE TO FALL, AA INDEX FINDS
According to the latest benchmark
AA British Insurance Premium Index for the three months
ending 30th September 2012, car insurance premiums
are showing a downward trend.
The Shoparound index – an average of the cheapest five premiums
from directly sold policies for each ‘customer’ in a nationwide
basket of risks – suggests that over the third quarter the
average quoted cost for an annual comprehensive car insurance
policy fell by 2.9% to £844. However over 12 months quotes have
risen by 5.6%.
Using the same Shoparound basket of risks on price comparison
sites suggests that the average premium has fallen by 1.0% to
£612; a drop over 12 months of 2.3%.
Simon Douglas, director of
AA Car Insurance, says that this is good news for customers
although the averages mask wide premium extremes.
“Competition is tough in the insurance market, forcing many
companies to reduce premiums despite the fact that costs show
little sign of abating. Nevertheless, some are still increasing
“Motor insurance has been a focus of Government attention for
some time and next year, new legal reforms are expected to
reduce the cost of personal injury claims and fraud. Whiplash
injury claims continue to pour in and under current legislation,
they are difficult for insurers to reject, even if they think
they may be fraudulent, because it is difficult to prove whether
or not a claimant has suffered.”
A new report from the Institiute of Actuaries shows that
personal injury claims management companies increased their
income by 21% in 2011, while the average small injury claim
including whiplash is £8,400, costing the industry an estimated
£400 million per year.
“The days of ‘open season’ for fraudulent injury claims, cash
for crash and similar scams are numbered,” Mr Douglas says.
Mr Douglas also points out that the insurance industry is
preparing for the gender-neutral environment after a European
court of Justice (ECJ) ruling takes effect from 21st
“Over coming weeks, most insurers (including
AA Insurance) will introduce gender-neutral pricing ahead of
the deadline. This will affect young female drivers most, who
could see premiums rise by as much as 25%.
“Insurers are likely to be cautious initially because they won’t
know what mix of business they’ll write after the change. They
will want to avoid writing young male business at unprofitable
rates, but competitive pressure will lead to premiums settling
down in time. That is likely to take very many months however.
“We may now have gender equality, but that still doesn’t mean
that it is fair.”
Young womens’ premiums fall ahead
of gender ruling
Premiums for young drivers (aged 17-22) have also fallen
slightly, following sustained increases over the past two years
which reflect the growing cost of claims involving young
drivers, especially young men.
Mr Douglas says: “The gap between young male and female drivers
had been gradually closing, although the latest Index shows that
premiums have fallen further for young women than for their male
peers. It may be that some insurers are taking a longer term
view of profitability, recognising that premiums will rise at
renewal when they cannot reflect gender in their rates.
“Just weeks from the ECJ gender change directive deadline, young
female drivers are paying on average, £500 less for their
cover. For new drivers, my advice to young women would be to
buy their insurance as soon as they can while young men might be
advised to wait until the New Year, since their premiums for
them are likely to fall further.”
Over the third quarter, young men saw their premiums fall by
0.7% to £1,603 while those for young women fell by 2.2% to
Drivers with telematic insurance, such as
AA Drivesafe, will see less change following the gender
ruling since premiums are affected more by driving performance
All regions saw average premiums fall, with the exception of
Anglia (an increase of 1.4%, according to the Shoparound
Index). Scotland, which has a legal system that discourages
spurious whiplash injury claims, remains the cheapest region in
which to buy car insurance with an average Shoparound quote of
£438 (a fall of 0.1%); while Greater Manchester and Liverpool is
still the most expensive £1,059 (a fall of 0.3%).