The UK vote to leave the EU came as something of a shock to a lot of people, but there are more surprises in store, including how being independent of the EU could impact on vehicle insurance prices.
There are a lot of expensive elements associated with owning a car and we don’t just mean purchasing the actual vehicle itself. Of course, that’s a HUGE investment, but the ongoing expenses can be catastrophic, the chief amongst them being annual insurance policies.
We’ve all become accustomed to driving more carefully, shopping around and looking for ways to drive down our insurance premiums and there could be some good news on the way, if recent reports are anything to be believed! Potentially one of the few projected upsides of Brexit, car insurance premiums look as though they could take a serious shit, thanks to the UK leaving the EU and being able to turn its back on EU laws and insurance rules.
Ok, so that all sounds a little hokey, doesn’t it? Don’t get us wrong; it’s not as if all of a sudden the laws and practical frameworks that have long governed car insurance are suddenly going to be considered as null and void or worthy of being ignored, but premiums might be on the precipice of becoming more competitive.
Are there any insurance rules that look set to be reversed?
This is an interesting question, especially given that in 2012, the European Court of Justice implemented a change to UK insurance premiums that proved unpopular with 50% of drivers. We are, of course, talking about the fact that insurance companies could no longer legally take gender into consideration when calculating premiums. This proved to be a far bigger blow to female drivers, who benefitted from gender-biased premiums, but made male drivers very happy! With this in mind, the question has ben asked: will this decision be reversed?
Before you start assuming that the television is about to be, once again, flooded with catchy car insurance jingles aimed solely at women who need handbag cover, it is unlikely that he ruling will be overturned. Insurers faced enormous administrative challenges when reacting to the ruling initially and it is improbable that they’d be willing to undo all of their efforts.
Another issue that has been called into question is the recent rise in insurance premium tax, which skyrocketed from 6%, all the way up to 9.5%. This jump came about in response to the UK charging significantly less tax than other EU countries and there is little to no chance that it will be reversed.
It might have seemed like a given that reversing these EU laws would lead to easy insurance premium reductions for UK citizens, but in reality, a far more pragmatic reason could be at the centre of the predicted price drops.
Why exactly could premiums be about to fall?
First things first, when we say that premiums could be, “about to fall”, we don’t mean instantly, but that’s an issue we’ll get to in a moment!
Researching the potential for insurance prices to fall, it quickly become clear that the reason behind all the speculative talk is simple and good old-fashioned competition. Seriously, that’s it! Once free of the shackles of EU law, UK insurance companies will seek out new and inventive ways to reduce costs and target specific groups of drivers, which will improve competition and make for more affordable premiums for everyone. Hopefully!
How long will it take to see post-Brexit price reductions?
If you’re hoping to see insurance premiums falling in the immediate future, you need to be prepared for some serious disappointment. The process of actually leaving the EU is going to take a VERY long time and it hasn’t even begun yet, not in earnest anyway.
The vote took place in 2016 and here we are, in 2018, still no closer to having a plan or any definite figures to start accounting for. Every day the media reports on yet more stumbling blocks to getting the process started and once it has begun, it will take two years for the entire break to be made. Realistically speaking, we might be looking at another three years, minimum, before insurance prices start being impacted. Look on the bright side though; that’s plenty of time for saving up, just in case things inexplicably go the other way.
Who could stand to benefit the most from lower premiums?
This is definitely a purely speculative query as there is no way to know for sure who is most likely to benefit from Brexit, in terms of insurance premium prices, but we have a few predictions to make.
Young drivers – perpetually on the unfortunate end of extortionately expensive premiums, particularly in their first year of being on the road, it makes perfect sense that brokers will be keen to entice and keep novice motorists. With this in mind, we are happy to make a tentative suggestion that more competitive first premiums could be on the horizon.
Multicar policyholders - the most attractive customers are those that will bring plenty of business and stick around for a long time, which is why multicar policies are more than likely to get a touch more fairly priced. We predict that policies with three or more cars on them will become very attractively marketed.
We’ve already established that EU law reversal is unlikely, but if it were to happen, female drivers would definitely feel the benefit as well.
Will anything cancel out the benefits of potentially cheaper car insurance?
So many things! While insurance premiums might get a little lower, it’s unlikely that prices will fall to such an extent that they will be able to cancel out rising new car prices, import tax on car parts coming in from Europe and servicing costs.
Cars brought into the UK from Europe, post-Brexit, are expected to rise in price by at least £1,500 per unit, whereas vehicles made in the country could incur extra costs of over £2,000, due to import tax on parts. We know that it’s unlikely that new drivers will be buying expensive cars, but experienced drivers could find that their insurance savings, if they pan out, could be totally cancelled out by unexpected rises in vehicle prices.
Servicing costs are being heralded as a near-certainty in terms of getting more expensive, once Brexit has been completed, as the frequency of part supplies will be affected by customs processes and import tax will add considerable cost as well.
While there is a lot of confusion, panic and uncertainty surrounding Brexit and the subsequent cost implications for UK citizens, all we can really do is wait and see. That might sound a little diluted and hazy, but with the best will in the world, predications can only ever be educated guesses and are subject to change at any point. Who knows, Brexit could still be reversed and then all of this posturing and predicting would have been for nothing.
To go back to the title of this article, it seems unlikely that the UK leaving the EU is going to trigger such a cataclysmic usurp of insurance prices that the market will bottom out, but there is definitely potential for some savings. Consumers will need to be as savvy as ever and happy to commit to regular price comparison searches, but even then, nothing is guaranteed.