Editorial / Car Insurance Premiums Index Findings



  • Young driver premiums falling after two years of sustained increases

  • Unfair’ gender ruling as young womens’ premiums rise sharply.

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 premiums.
“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 December 2012.
“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 £1,127. 
Drivers with telematic insurance, such as AA Drivesafe, will see less change following the gender ruling since premiums are affected more by driving performance than gender.
Regional variations
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%).


 AA Car Insurance  



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