The average price paid for motor insurance in the second quarter of the year rose slightly on the previous quarter, albeit that the cost of cover fell by £10 on the same quarter last year, according to the ABI’s latest Motor Insurance Premium Tracker out today. The Tracker is the only survey that looks at the price consumers actually pay for their cover, rather than the price they are quoted.
Spiralling vehicle repair costs, driven by ever more complex cars and the impact of the falling pound on the cost of imported parts, continue to add significant cost pressures to insurers.
Going forward, the Government’s recent changes to the Personal Injury Discount Rate, (a formula used to help calculate high value personal injury compensation awards), which come into force next month, will further add to insurers’ costs, and put more pressure on premiums, especially for higher risks, such as young drivers.
Today’s figures show that, prior to the Discount Rate change:
-the average price paid for motor insurance in the second quarter of the year, at £467, rose slightly by £1 on the first quarter of the year. This follows a record £15 fall in the previous quarter;
-premiums fell by £10 on the same period last year. This was the fifth consecutive quarter where there was a year-on-year decrease.
The Discount Rate reflects that someone getting a lump sum compensation payment will typically be advised to invest it and will expect to get a return from it. The lower the rate, the higher the compensation awarded and the greater the cost to compensators, such as insurers and the NHS. The Government had previously indicated to the Stock Market that the rate would be set between 0 and 1%, whereas the actual rate set was minus 0.25%.
-Repair costs are rising, reflecting ever more sophisticated vehicle design and technology, which in most cases costs more to repair when damaged. Current figures show that the repair bill for insurers in the first quarter of this year was £1.2 billion, the highest quarterly figure since the ABI started collecting this data back in 2013.
-In the first three months of this year, the cost of theft payouts rose 22% to £108 million on the same period last year. The rise reflects Home Office figures recording a 50% rise in vehicle thefts over the last five years. The increase is in part being driven by keyless car crime.
Mark Shepherd, ABI’s Assistant Director, Head of General Insurance Policy, said:
“The recent decision on the Discount Rate is bad news for motorists that will simply add to insurers costs rather than save customers money, at a time when vehicle repair bills and theft claims are rising.
“Motor insurance remains a highly competitive market, but some motorists may in the future have to search harder to get the right policy for their needs at the best price. This makes it more important than ever that the whiplash reforms in the Civil Liability Act are implemented on time and in full.”