Car premiums falling, home premiums up in Q2 2018 benchmark study

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Car premiums anticipate Civil Liabilities Bill whiplash claim savings

Intense competition keeps car premiums down

Home insurers mop up after Beast from the East

Concern about a ‘subsidence year’?

Competition pushing down car insurance costs - The latest benchmark AA British Insurance Premium ‘Shoparound’ Index for the three months ending 30th June 2018 shows that car insurance premiums continue to fall.  The second quarter saw over £18 wiped off the average quoted premium while over 12 months, premiums have dropped by an average of 10.8% to 10.8% to £648.10, a whopping £78.83 cheaper. 

This follows an all-time high of £726.93 at the end of the second quarter last year.

Janet Connor, the AA’s insurance director says: “Although not everyone will see premium falls of this size it is certainly welcome news for many drivers.

“Premiums had been steadily driven upwards by the fast-growing whiplash claims epidemic, fuelled by unscrupulous cold-call law firms, as well as higher car repair costs.

“Last year the Government said it was pushing through reforms to the claims culture with the Civil Liabilities Bill, as well as a review of the much-misunderstood ‘discount rate’ on payments made for serious injury which is likely to cut insurance pay-outs for serious injury claims.

“That has triggered a fall in premiums in the expectation that claims costs would fall.  The Bill has passed its third reading in the House of Lords meaning that it will now go through its final stages in the House of Commons after the summer recess.

“I understand that although the Bill should become law early next year, including adjustment of the discount rate, one of the key reforms – increase of the small claims track, which means law firms won’t be able to make money (typically 80p for every £1 in compensation awarded) from insurance companies for claims below £5,000 – will be delayed until 2020.  That’s to allow the public portal to be built that will enable people who have suffered minor injuries to easily make claims themselves.  They will be supported through the process without the need to involve a law firm.

“The insurance industry has welcomed this because it should immediately cut the number of claims made through cold-claim firms, hence falling premiums which are now being further fuelled by intense competition.”

Justice Secretary David Gauke said: “I am delighted car insurance premiums continue to fall, and that the AA recognises our crackdown on whiplash claims as a catalyst.

“Our reforms will ensure fairness for both motorists and claimants; and will see insurers pass down savings to their customers.

“Hard-pressed motorists will welcome this fall, for the second quarter running, leaving them with more cash in their pockets.”

Home insurance premiums climbing - The ‘Beast from the East’ may seem a world away as temperatures hit 30 degrees C but insurers have seen a jump in claims for property repairs following damage to buildings, thanks to sub-zero temperatures, according to the AA.

But the AA says some insurers are now fearing a raft of subsidence claims with the long hot spell following a wet and cold winter. 

Premiums for buildings cover rose 2.3% over the quarter ending 30 June 2018, or 5.9% over 12 months to an average quoted premium of £119.79.  The index for contents cover however, remains relatively static.  Although there was a small rise of just 0.57p or 1% for the quarter, over 12 months there has been a fall of 1.7% to £59.69. 

A typical combined buildings and contents policy quote is now £163.03 – an increase of £5.90 or 3.8% over 12 months, from £157.13. 

Janet Connor, the AA’s director of insurance says: “The harsh winter seems a lifetime away as we enjoy a long hot summer but insurers are counting the cost of claims related to the freezing conditions. 

“Now there is some concern in the industry that if the hot weather continues to dry up not only our reservoirs. leading to hose-pipe bans, but the soil too – particularly clay that shrinks as it dries out and can lead to increased subsidence risk and consequent damage to buildings, in some parts of the UK.

“However, the industry is well prepared for such an eventuality.  The last time there was a significant rise in subsidence claims was in 2006.  Now might be a good time to check that your home is fully insured against such risk.”

Subsidence is the most damaging geo-hazard to property in the UK costing around £3bn every decade.  The current MORECS Met Office measure of soil moisture deficit in the UK is ‘high amber’ suggesting that if the hot summer continues there is an increased risk of a spike in subsidence claims, particularly where clay soil shrinks as it dries out.

Over June 2018, only 2.1mm of rain fell over the south-east, compared with the June average of 54mm and the lowest since 1925.