Amidst the current public health crisis and global pandemic, premiums continue to accelerate in the motor insurance market, with prices rising 2.8% in the last 3 months, totalling a 5.5% increase in the last year, according to the latest figures from data insight specialist, Consumer Intelligence.
Despite the recent economic repercussions of the coronavirus outbreak, it is claims costs that are driving the continued upward trend. With today’s car becoming ever more hi-tech – newer cars are more expensive to repair than older models – the cost of each claim is steadily rising, according to the Association of British Insurers.
Another factor driving premiums skyward is the impact that’s still being felt from last year’s Ogden rate adjustment, forcing insurers to pay higher compensation payouts to accident victims.
“Motor pricing is currently being steered by rising claims costs and the continued knock-on effect of the Ogden changes,” says John Blevins, pricing expert at Consumer Intelligence. “However, current events could lead to further premium increases, with the financial hit insurers will be taking to their investment businesses.
“The recent reduction of interest rates to 0.1% will also cause pressure on the bottom lines of insurers. This may manifest itself as increased insurance premiums in the coming weeks and months. Time will tell.
“Existing customers will have their premiums locked in but new business and renewal customers during this period may feel the pinch.”
The average car insurance premium now sits at £829. Whilst the under 25s continue to pay the highest premiums (an average of £1,795), this age group has seen the smallest increase – just 0.7% in the last 12 months. The over-50s (7.4%) and 25-49s (6.2%) witnessed much bigger hikes. However, their average premiums are still somewhat cheaper at £402 and £693, respectively.
“It’s a two-speed marketplace,” says Blevins. “Large-scale price increases are not being felt across the board.”
Uptake of ‘black box’ car insurance is up slightly in the last month. A fifth of the cheapest quotes now involve telematics policies, where drivers agree to install technology in their vehicles to monitor their driving skills in a bid to cut premium costs. However, take-up is still low in the older age groups.
Just 3% of the top five cheapest car insurance quotes for the over-50s come from telematics brands. This rises slightly to 14% for 25-49 year-olds. It’s a different story for younger drivers aged under 25. Almost two-thirds (61%) of the cheapest quotes for these motorists are telematics products.
“Up until now, telematics has continued to keep generic premiums hikes at bay for the under 25s,” says Blevins. “However, under new lockdown conditions enforced to flatten the curve of the coronavirus outbreak, a number of insurers are hitting pause on offering telematics policies to new customers due to installation challenges. As a result, we could see the average premium for the under-25s rise over the coming weeks and months.”
The West Midlands (8%) continues to attract the highest premium rises of any region, with Scotland (7.6%) and London (7.4%) following closely behind. All regions saw premiums increase over the last 12 months.
London remains the most expensive place for car insurance – a typical policy costing £1,269. At less than half this, the South West (£601) maintains its title as the cheapest region to insure a car despite witnessing price rises of 5.6% in the last year.
“Claims experience and localised crime rates tend to influence regional pricing,” says Blevins.