Written by
Frank Ascot, Business expert
, 18 May 2018

The price of car and home insurance premiums has fallen in the past three months, according to research by the AA. Car insurance premiums peaked at their highest ever during the second quarter of 2017 but have fallen steadily since then to an average quoted premium of £660.64, which is 2 per cent less than in the final three months of 2017.

Average quotes for home buildings, contents and combined policies all fell over the quarter but remain higher than a year ago, according to the research.

The AA’s index reflects an average of the five cheapest prices from a range of insurers quoted by brokers, price comparison sites and direct against a fixed nationwide basket of customers. ?

Young drivers continue to pay the largest premiums for their cover.

  • Men aged 17 to 22 pay on average £1,766.17 for a year’s comprehensive cover
  • Women in the same age group can expect to pay £1,505.28.
  • The cheapest age to insure a car is 60 to 69, with an average quoted premium of £403 with a small difference between genders. Above this age group, premiums begin to rise.
  • Standalone buildings policies increased over 12 months to an average of 5.1 per cent to £117.47 despite a small fall over the quarter of 0.4 per cent.
  • Contents policy quotes increased by 24p compared with this time last year, but over the quarter fell 1.5 per cent or 89p.
  • The average quote for a combined buildings and contents policy increased by 4.8 per cent, or £7.36, to £161.75 over the past year, although over the first quarter of 2018 it fell by 0.3 per cent or 42p.

Michael Lloyd, the AA’s director of insurance said:

“This is a glimmer of good news for drivers who are facing rising fuel prices and increased vehicle excise duty rates. Insurers’ confidence in offering lower quotes is boosted by the Government’s Civil Liability Bill commitment to review the so-called Ogden, or discount, rate which affects the value of compensation payouts to severely injured victims of car crashes, as well as clamp down on the whiplash claim culture. This particularly affects premiums for young drivers who tend to be involved in more catastrophic crashes, and pay much higher premiums, than any other age group.

Job titles count, as do renewal policy options...

Car insurance premium costs soared across 2017, and hit record high levels towards the end of the year. Although it was clear that the Ogden rate review and several regulatory interventions to question the lack of competitiveness in the Insurance it’s not a situation that a comparison site could ignore in term of generating headlines - according to MoneySuperMarket average car insurance premium prices hit an all time high £574 in the UK in December 2017.

However the comparison website also uncovered new data that means that some drivers are almost paying £700 more than they should be for their insurance, due to simple mistakes - one costly mistake that drivers could be making is simply listing the wrong occupation or using the wrong wording.

For example, students may not work while at university, which is why they may list their job title as ‘unemployed’ instead of ‘student’, but this could be increasing their premium by 51 per cent - as much as £677.

It’s a similar story for older people who no longer work. Listing themselves as ‘unemployed’ instead of ‘retired’ could cost a driver 37 per cent more for their car insurance. Stay at home parents could also pay over a quarter more by listing themselves as ‘unemployed’ instead of ‘housewife,’ revealed the research.

Kevin Pratt, consumer affairs expert at MoneySuperMarket

“Going through the car insurance journey on a comparison website only takes a few minutes, but it’s not a job that should be done too hastily. To get the best cover at the best price, you have to choose the most accurate answer at every stage of the quotation journey. And that can mean trying alternatives to find the one that best matches your situation, instead of plumping for whatever seems most obvious.

“It’s worth taking your time and exploring your options at each stage of the online journey. For example, if you describe yourself as ‘unemployed’ when in fact you’re a student, you’re retired or you stay at home to look after the home and family, you could end up paying up to 50 per cent more for your cover than you need to.

“Regardless of occupation or status, drivers should avoid settling for the renewal quote they receive from their existing insurer, because firms tend to reserve their best prices for new customers. Shopping around at renewal is the easiest and most effective way of reducing your premiums, with significant savings available.”

Pay-as-you-go insurer Cuvva, conducted their own research and warns that many drivers are already struggling to afford the cost of motoring and the situation is set to get worse. They point out that Motor insurance premiums are accelerating at a rapid pace, with the cost of the average policy rising 23 per cent to £827 in the past two years 2016 & 2017 alone. Drivers in London face the highest average comprehensive premium of £1,283 a year, which rises to £1,599 in inner London.

Cuvva Founder Freddy Macnamara said a lot of drivers are struggling to keep up with annual premiums: “ If they keep rising this year as expected, we could see a spike in second-hand vehicles coming onto the market as more drivers are forced to give up their cars. We have already seen new car sales plummet in the last year and this could be the next step.

One reason premiums are racing away is that the average cost of a motor insurance claim has risen to the highest level on record, according to figures from the Association of British Insurers (ABI). The average claim now costs insurers £2,936, because of the increasing cost of theft and vehicle repairs. Personal injury claims are also driving up the cost, with the 320,000 claims settled in 2017 costing on average £10,816 each.

Whiplash-style claims reported to the Compensation Recovery Unit continue to rise despite the continued fall in road traffic casualties, raising suspicions that many are bogus. ABI head of motor and liability Rob Cummings said premiums have risen by nine per cent in the last 12 months, adding an extra £40 to the average policy.

Another culprit was the Government’s decision in February last year to change the Ogden rate, which is used to calculate costs in personal injury claims, which further drove up the price of cover. It is now set to reverse this decision and Cummings said:

“Rising premiums make it all the more important for the Government to push ahead with its reforms to personal injury compensation without further delay.”

Motorists are responding to higher premiums by switching at renewal in greater numbers than ever, with 27 per cent switching last year according to comparison site GoCompare.com. Site car insurance expert Matt Oliver said:

“Nothing makes loyal customers head for the exits quicker than an insurance renewal letter telling them their premium is going up.”

Motorists are also more willing to switch because they have learned from experience that loyalty does not pay.

Oliver said switching is quick and easy online, and you can save up to £279 on your premiums. The longer it is since you last switched, he believes, the more you are likely to save.

Written by
Frank Business expert
, 18 May 2018

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