The first quarter of 2012 has seen a fall in the average premium quoted for a typical comprehensive car insurance policy, according to the latest benchmark AA British Insurance Premium Index.
At the end of March 2011, the average Shoparound quote, based on the five cheapest premiums from a range of insurers against a nationwide basket of risks, had dropped by 1.1% to £1,132. The same criteria applied to price comparison sites showed a fall of 4.3% to £737.
The ‘market average’ of all quotes in the Index, showed almost no premium movement. The average quote for comprehensive cover remains at £1,452. The Index data shows that while a few insurers are heavily discounting to attract new business, others have continued to increase premiums.
Over the year ending 31 March, the Shoparound index rose by 7.7%, the smallest 12-month increase since 2008. While still higher than inflation, it is significantly less than the record 40.1% annual increase recorded in April 2011.
For young drivers, men aged 17-22 also saw their premiums fall by almost 1% over the quarter although those for young women increased by 4.8%.
Simon Douglas, director of AA Insurance, says that the fall in the Shoparound quotes is welcome news for customers who have seen record premium increases over the past two years.
However, he warns that the factors that drove premiums up haven’t gone away.
“The industry is still having to deal with fraud as well as increasing numbers of personal injury claims, despite the number of crashes on Britain’s roads falling. Industry costs continue to rise at around 10% per year,” he says.
“I can’t see this drop in premiums being sustainable for long. My fear is that if prices do continue to drop, we’ll see a repeat of 2009, when industry losses led to premiums suddenly rocketing up following a long period of little movement.”
However, Mr Douglas believes that new legislation and other changes in the industry will help to bring costs under control.
“We are already beginning to see the number of uninsured drivers coming down due to better police detection and the introduction of Continuous Insurance Enforcement legislation last year,” he says.
“In addition, insurers are getting smarter at dealing with and exchanging information about fraud, while the new police Insurance Fraud Enforcement Unit is making significant progress in tackling major insurance fraud such as cash-for-crash scams and ghost broking.
“I also expect new legislation designed to manage no-win no-fee personal injury claims will eventually help reduce costs.”
From December 2012, a European Court of Justice ruling means that insurers will no longer be able to use gender as a means of calculating insurance premiums. Young drivers will be particularly affected as young women pay premiums up to 40% less than their male counterparts.
“The latest figures suggest that insurers are starting to adjust their pricing ahead of the ruling, particularly for young drivers,” Mr Douglas says.
“After December, young women can expect to see premium increases of up to 25%.
However, Mr Douglas says that with Government weight behind it, telematic or ‘black box’ insurance points the way forward particularly for young and inexperienced drivers.
“I expect this type of cover to become increasingly main-stream. It is gender-neutral and measures driver performance against criteria such as speed, time of day, cornering and braking and can bring significant premium reductions for safe drivers.
“There is growing evidence to show that users of ‘pay by performance’ systems such as AA Drivesafe are much less likely to be involved in a crash than those with conventional cover.”
