The latest benchmark AA British Insurance Premium Index brings no joy to motorists as premiums continue to go up at record rates.
Over the first quarter of 2011 – a period when premiums usually show little movement – the typical Shoparound premium for a comprehensive car insurance policy rose by 5.9% to £892.08; and by 40.1% for the 12 months ending 31 March 2011.
The average quote for a Third Party, Fire & Theft (TPFT) policy went up by 10.7% to £1,532.62 (12-month increase 82.1%) – but this reflects the typical young driver profile of TPFT insurance buyers. Many insurers no longer offer this type of cover.
The AA’s Index analyses quotes from over 50 insurance companies, brokers and schemes against a basket of risks that is typical of the UK driving population. The Shoparound premium is an average of the cheapest three quotes for each ‘customer’.
Simon Douglas, director of AA Insurance, says: “The record rises in fuel costs coupled with spiralling car insurance premiums is disappointing news and is making driving unaffordable for many, especially cash-strapped young drivers.
“This is leading to more people withholding information when taking out a policy or exaggerating personal injury claims to try to reduce their costs. But this simply piles on costs for insurers and results in yet higher premiums for honest motorists
“Despite the sharp premium increases, insurers are still making losses although the large underwriting deficits of 2009 have probably now been halved.”
The main drivers of premium inflation remain fraud and injury claims, Simon Douglas explains. These were identified by the Commons Transport Committee as being among the chief causes of rising premiums. Kenneth Clarke MP, Lord Chancellor and Secretary of State for Justice announced on 29 March a number of measures to curb the high costs associated with the UK’s ‘no-win, no-fee’ claims culture which, according to some estimates, is piling up to £80 on every honestly-bought car insurance policy.
Simon Douglas points out: “Although the number of collisions on Britain’s roads is falling, the number of claims for whiplash injury is rising. It’s tempting to make such claims with the huge number of ‘accident management’ law firms using cold-call marketing techniques.
According to the Association of British Insurers, for every £1 paid in compensation, a further 87p is paid in legal costs. Every day over 200 such claims are made, often for accidents that happened up to three years previously, for which no mention of personal injury was made at the time.
“The proposals made by the Lord Chancellor should help to control these costs if they become law.”
Drivers aged 17-22 have again taken the brunt of the increases with a typical premium of £2,431 being paid: more than 64% higher than 12 months ago. Young men continue to pay much higher premiums (average Shoparound quote £3,052) than young women (£1,767).
“Young men are 10 times more likely to suffer a catastrophic crash than older drivers. More than half of insurers won’t insure teenage drivers so there is less choice and premiums increase at a faster rate than average.
“Last year, we said that premiums quoted for young drivers were becoming unsustainable – and that now seems to be happening with many quotes for 17 or 18 year-olds being simply unaffordable.”
From December 2012, insurers will no longer be able to take gender into account when calculating premiums. Gender is currently one of the most important factors influencing premiums so the cost of insurance for young women is likely to rise substantially.
However, Simon Douglas believes that this might provide the impetus needed to make telematics or ‘black box’ pay-as-you-drive policies more acceptable. Such systems typically measure driving performance. “They reward careful drivers, typically women, by reducing premiums and penalise those who take risks,” he says.
The AA is expected to launch its own pay-as-you-drive policy later this year.
Simon Douglas says that whilst price increases have continued into 2011, he believes that rises over the rest of the year will be much smaller. “I’d be surprised if they exceed 20% over the year,” he says.
“As we enter 2012 I think we’ll also see new measures starting to take effect, such as Continuous Insurance Enforcement (which became law on 1 April); improved fraud controls such as access to the DVLA database for insurers and measures to control costs associated with personal injury claims, all of which will help to keep the lid on premiums.”
Source : The AA Press Release
