Annual comprehensive car insurance premiums rose by 0.7% or £4.25, to £640.82 in the first three months of 2017, according to the AA’s latest British Insurance Premium Index.
The findings for the average quoted Shoparound premium – which aggregates quotes from direct, broker and price comparison site sources using the five cheapest quotes for each ‘customer’ in a nationwide basket of risks – also revealed that those aged between 40 and 59 actually saw their premiums fall.
Over 12 months, the average increase was 12.9%, or £73.42.
Quotes for third party, fire and theft cover, which the broker stated is mainly bought by young drivers with older cars, rose by “an eye-watering” 21.6%.
‘Astonishing’ discount rate reduction
Michael Lloyd, the AA’s director of insurance, pointed out that if it were not for the discount rate change, premiums would have remained stable or even fallen.
He said that the move to cut the rate – also known as the Ogden rate – from 2.5% to minus 0.75% had had an immediate effect on car insurance premiums because injuries already claimed for, but not yet paid, were affected by the rate change as well as new claims.
“It was an astonishing and unrealistic decision that didn’t take account of where claimants are most likely to save their money,” Lloyd argued.
“They are not going to put their money into government securities, on which the discount rate is calculated, which have a negative interest return.”
The firm stated that because of the way the Discount Rate is applied, young drivers will take the brunt from the change.
The AA also highlighted that the last sustained period of car insurance cost increases was in 2010 when the average quoted Shoparound premium increased by just over 40% in 12 months. It said this was largely due to fast rising whiplash injury claims.
“The Index suggests that the first quarter is the calm before the storm,” continued Lloyd.
“Although I don’t expect to see premiums rise as sharply as they did over 2010/11, there’s no doubt that they will quickly climb again unless further IPT increases are curbed and the Discount Rate is reviewed.”
Four regions saw premiums fall over the quarter, the largest drop being Border & Tyne Tees which saw average quoted premium fall by 1.3%.
The highest rise was in Northern Ireland where the average quoted Shoparound premium jumped by 5.8%.
On the UK mainland, the biggest rise was for the South, at 1.9%.
Despite a rise in premium of 1.5%, Scotland remains by some measure the cheapest region to insure a car with an average quoted premium of £469.55. The North-West is the costliest region to insure a car, at an average of £906.31
Premiums by age
Drivers aged 17-22 paid the highest premiums and on average were quoted £1,476.61 the research noted.
Two age groups saw their premiums fall over the quarter: age 40-49 by 1.0% to £500.75 and those aged 50-59 by 1.9% to £443.22.
Article is care of www.insuranceage.co.uk and can be found here.