Insurance-Edge.Net thought we would analyse the data and opinion, to try and nail down why motor insurance premiums are rising rapidly.
Yesterday we ran a story on van insurance, which identified fraud, increasing van deliveries of online packages, plus the amount of new technology inside modern vans, as being part of the reason why premiums were over £1200 on average, and over £1320 per year for drivers opting for Social, Domestic and Pleasure.
Sifting through press releases today we note that the AA estimates that £35 has been cut from car insurance costs in the summer quarter, quoting the British Insurance Premium Index as the source. The average UK motor quote fell from £714 to £679 by September 2017.
SAVINGS TOMORROW, UNLESS THE CHANCELLOR HIKES TAXES?
The AA notes that premiums are up by £60 since last year, so the reverse of £35 doesn’t cancel the bad news for UK drivers. Mike Lloyd from the AA puts the blame squarely on the UK government’s changes to the discount rate, affecting compensation claims and causing `losses of millions’ for car insurance underwriters.
Lloyd also noted that reforms to whiplash claims laws would reduce costs next year. However Lloyd cautioned Chancellor Hammond not to use that reduction as an excuse to hike Insurance Premium Tax ( IPT) in the November Budget. Lloyd also urged the Chancellor to consider abolishing IPT for drivers under 25 who have telematics fitted to their vehicles. Interesting idea, although older drivers using a black box might then wonder whether it was worth the costs of fitting one?
IS THE DISCOUNT RATE CHANGE REALLY TO BLAME?
Simon Stanfield speaking at the MASS (Motor Accident Solicitors Society) Conference earlier in October thought that blaming the discount rate changes was too simple an explanation for the price rises of the last 12 months.
Stanfield said; “Although IPT is playing its part in the dramatic rise in premiums, prices have increased, despite promises from the insurance industry that costs would drop, if the LAPSO reforms they pushed for became reality. One thing is clear, the rises cannot be blamed on increased legal costs.’
Stanfield added that he thought the same situation would occur after the Civil Liability Bill became law next year; insurance costs would remain static, despite the reforms. He stressed that whiplash claims were falling as gangs of fraudsters were being jailed for their part in staged accidents, and he questioned the need for further reform.
WHERE NOW FOR MOTOR INSURANCE RATES?
Next year should see stability in prices, but it looks likely that there will be some winners and losers in the motor insurance market.
Insurance-Edge.Net thinks that brokers and underwriters who embrace new technology in customer service, especially in claims handling, car hire and managing legal costs after an accident, stand to make the greatest savings to their bottom line long term.
Sadly, we also predict Hammond will raise IPT in November, and cite whiplash reforms as a clear case of `jam tomorrow,’ but few will believe him. We predict a rise to 15% IPT and 20% for older vehicles, as some type of `green’ initiative. Again, nobody believes this, but it is a good wheeze for the Exchequer.
There will always be a place for the human touch, but this is probably best deployed in sales and renewals, where `people skills’ can make all the difference once a customer begins shopping around. The practice of hiking rates at renewal time, instead of rewarding loyalty also seems a policy past its sell-by date.