Accident-prone young drivers and a surge in fraudulent claims are key factors behind the steep rise in motor insurance premiums which threaten to drive some motorists off the road.
According to the benchmark AA British Insurance Premium Index, motorists faced a startling increase of 11.5% in the third quarter, based on the cheapest three quotes collected in its survey.
In the year to September 30, the cost of annual comprehensive cover jumped by 39.3% to £792, the biggest annual rise ever recorded by the Index which began in 1994.
For third party, fire and theft policies, which is the best that many younger, riskier drivers can get, a 54.6% jump produced an average annual bill of £1,097.
Young drivers face the stiffest increases because they generate so many claims. Over the past year, the average cost of cover has jumped by 51% for 17- to 22-year-olds. Even after shopping around, men of this age can expect annual premiums around £2,500, while women (less dangerous) pay £1,400.
AA Insurance director Simon Douglas says: “Statistics from the Department for Transport (2009) show that a third of men killed or seriously injured on Britain’s roads are under 25.”
He adds: “Car crashes are by far the biggest threat to life among young people – considerably more than drugs or knife crime, for instance. These shock statistics underline why premiums for young drivers are soaring.”
Middle-aged drivers (40-59) have seen a 30% surge in premiums, perhaps because many parents extend their policies to provide cover for children. The pain for all motorists, says Douglas, has been intensified by price comparison sites which drove premiums so low that many companies lost money on car insurance.
“Five years ago we warned that sharp premium inflation would be the result of this competition but the recession is adding to the pain,” he says.
Today, insurers pay out £123 to settle claims for every £100 collected in premiums and the Government will push prices higher on January 1 by adding 1% to insurance premium tax.
The AA thinks premium rises could continue in 2011, although the largest rises may already be factored in.
Meanwhile, few can predict when the bill for settling personal injury claims will level off as “no-win, no-fee” lawyers seek out accident victims to pursue their claims. One estimate suggests 30,000 fraudulent claims are paid out each year, adding an average £80 to the cost of each policy purchased.
New figures from the Association of British Insurers (ABI) from an analysis of 50,000 low value personal injury claims reveal an average compensation payout of £2,430 – plus legal fees of £2,100 a time. A moneysupermarket.com report suggested in September that one motorist in every 20 aged under 35 has “staged” an accident to make a fraudulent insurance claim.
AA spokesman Ian Crowder says: “Ultimately honest motorists pay for this scam through rising premiums. The fact is that it is very difficult to clinically disagree when claimants say they have whiplash injuries, and on low value claims insurers know it is cheaper to pay up than to fight the case in the courts.”
Source : Daily Post
