Friday, 21 April 2017
Insurance premiums continue to rise
The rising cost of motor insurance shows no signs of falling, according to the ABI's Motor Premium Tracker published today. The ABI's Tracker - the only survey of what motorists actually pay for their motor cover - shows that:
• The average premium, at £462, has risen by eight per cent since Q1, 2016, adding an extra £34 a year to the cost of cover. The average premium is now at its highest level since ABI started collecting the data in 2012. This reflects continuing cost pressures around rises in whiplash-related claims, Insurance Premium Tax, increasing repair bills, and the significant cut in the Discount Rate.
• For the first time average premiums in Q1 have not fallen when compared to Q4. Average premiums have fallen in the same period every previous year since ABI began recording the data. This is partly due to the spike in new car registrations in Q1, which are purchased predominately by older, lower risk drivers who generally pay lower premiums.
Further rising costs could spell more misery for millions of motorists. The change to the way in which compensation for serious personal injuries is calculated – the Discount Rate – will lead to massive additional costs for insurers.
Further increases could come as reinsurance renewals are due in early July or at the beginning of 2018. Many insurers choose to reinsure against large risks, such as catastrophic personal injury claims, which means some of the impact of the recent change will so far have been absorbed by existing reinsurance contracts. But given the size of the discount rate cost impact, these companies will inevitably increase their premiums when that reinsurance is renewed, adding to insurer costs which will inevitably feed through to the premiums insurers have to charge customers.
This Government recognised that reform is needed to strike the right balance between the interests of claimants and consumers, which the ABI is pushing them to urgently resolve.
And with Insurance Premium Tax rising from 10% to 12% on 1 June, higher insurance bills for many look inevitable.
Rob Cummings, ABI's assistant director, head of motor and liability, said, 'Despite rising costs, insurers are doing all they can to ensure that motorists get the most competitive deals possible. The industry can only do so much though, and it is important that whichever party is in government after the election, that they commit to measures to help lower the cost of car insurance. Whatever the outcome, the new government must push ahead with reforms to tackle low value whiplash-related claims and introduce urgent reforms to change the framework for setting the Discount Rate.'