Despite an overall increase of 2.7% in the last 12 months, average premiums for UK motorists began to fall as the country went into lockdown, according to the latest research from data insight specialist, Consumer Intelligence. Average premiums now stand at £876 following a 1.4% fall in the last three months, most likely a result of the global pandemic.
John Blevins, pricing expert at Consumer Intelligence says: “With fewer cars on the road and the subsequent reduction in claims, it seems some of those savings may be making their way back to customers via reduced premiums.”
The past 3 months have seen all age cohorts average premiums reduced. Under 25s by 1%, 25-49 by 1.4% and Over 50s by 1.5%.
In the last year, the cost of motor insurance for the under 25s has remained static, with a net movement of 0%. However, this age group has seen the biggest reduction in premiums over the longer term – a 20.3% fall since Consumer Intelligence started tracking average premiums in October 2013 – largely driven by the emergence of telematics policies. The average premium now sits at £1912.
Blevins says: “Once again the telematics offerings are keeping premiums down for the under 25s. The proportion of the cheapest prices being offered to this age group by a telematics provider is 53%. This has reduced however from 63% in May 2019. This would suggest more mainstream products are offering competitive pricing for these younger drivers without the black box technology.”
25 -49-year-olds have seen an increase of 3.2% in the last 12 months, with the over 50s witnessing a 3.6% increase. Average premiums are currently £655 and £392 respectively.
London remain the most expensive region in the UK for car insurance and also saw the largest rise of the past 12 months (5.7%). However, a reduction of 0.6% has been seen in the past 3 months. The average premium for motorists living in the capital is currently £1503.
North West (£1059) and West Midlands (£952) are the next most expensive regions. The North West region did, however, see the 2nd largest price reduction in the past 3 months (2.8%). The South West saw the largest reduction of 3.3%.
Currently Scotland has the lowest premiums of all UK regions (£543) despite increases of 3.4% over the past 12 months.
Blevins adds: “Regional pricing will be dictated by claims experience and crime rates. Both of which has fallen during the current pandemic. Less people on the roads and more cars parked safely at home.”
The wider challenge for those in the car insurance sector is the switch to working from home, which will mean many people simply do not need a second car. That trend will gather pace next year, when tax rises levied to help pay back some furlough and Covid-19 spending are bound to be implemented by the UK government. The decision to sell the second car will be that bit easier when fuel costs rise and Councils introduce their own ULEZ schemes to replace the lost business rates revenue as the High Street shrinks.
Brokers and MGAs who successfully market PAYG, low mileage schemes, that offer flexible multi-driver cover and are synced to car-sharing apps, or include free bicycle insurance up to £1000, are likely to be the long term winners. People are also going to face more restrictions on urban car use as activists continually scream for more green legislation. Special electric and Hybrid car schemes will always get more free coverage in the MSM and crucial likes & sharing on social media too.
In a nutshell, car insurance brokers who `go woke’ are more likely to win new customers than anyone else in the new normal landscape.