Car Insurance premiums start rising again, according to AA Index

2.3% premium rise less than expected

Is shopping around contributing to premium rises?

Injury claims still ‘unacceptably high’

Car insurance premiums have started to rise again with a small increase in the average quoted premium for an annual comprehensive car insurance policy over the second quarter, according to the AA’s latest benchmark British Insurance Premium Index.

This follows a first-quarter slump after a sharp year-end spike, for the three months ending 30th July 2016.

The typical quote to someone shopping around for their cover rose by £12.56, or 2.3%, to £568.48.  That compares with a 0.4% fall over the previous quarter and a rise of 10.1% over the last three months of 2015.

Over the 12 months ending 30 June, the typical Shoparound* quote has risen by nearly £84 from £484.86.  This is an increase of 17.2%, compared with the 20.7% rise over the 12 months ending March 2016.

The ‘Shoparound’ quoted premium is an average of the five cheapest premiums for each ‘customer’ in a nationwide basket.  The prices are derived from both the direct and price comparison site markets.

Michael Lloyd, director of insurance at the AA comments: “Premiums have not risen by as much over the second quarter as some commentators predicted although it’s still an upward trend that I expect to continue over the rest of the year.  But it appears that the steam has gone out of the sharp rises we saw last year and competitive pressure is, once again, beginning to keep prices in check.  Nevertheless, the insurance industry continues to face many challenges.

“For example, increasing numbers of car owners shop around for their cover every year, especially at a time when premiums are going up.  

“As more people look for introductory offers there is less incentive for companies to offer loss-making prices to attract new business that will, a year later, go elsewhere.  So I believe this is one driver of recent premium increases while insurers are looking for ways to better reward customer loyalty.

“Nevertheless, false or exaggerated claims for whiplash injury remain unacceptably high, thanks to the persistence of cold-calling claims management firms; rising costs of crash repairs as vehicles become more complex and a rise in uninsured driving all keep premiums higher than they should be.”

Regional winners and losers

Northern Ireland has seen the biggest increase in car insurance premiums over the quarter at 7.8%, taking the average quoted Shoparound premium to just over £800, making it the once again the most expensive UK region to insure a car.  The cheapest remains Scotland with an average Shoparound premium of £404, an increase of 2.5% over the quarter.  The smallest quarterly increase is Border/Tyne Tees where a 1.4% rise has taken the average quoted premium to £565.

Winners and losers by age

Young drivers (aged 17-22) who already pay the highest premiums for their car insurance, have seen the biggest jump this quarter – 3.5%, or over £42 added to the typical £1,240.50 of a policy.  The smallest increase was at the opposite end of the age scale, those over 70 seeing a rise of 1.2% to £452.  The age band attracting the lowest premium is 60-69 with an average Shoparound quote of £349 – a rise of 3.2%.

Comments Lloyd: “Young drivers account for the largest number of crashes involving death and serious injury and their premiums recognise that.  Premiums for drivers aged over 70 begin to rise and increase sharply as drivers reach their 80s and 90s yet the number of claims for this age group remains significantly lower than for drivers in their teens and 20’s.”