Car insurance prices rise for the first time in over a year

Car insurance prices have risen for the first time in more than 12 months to an average of £760

The price of car insurance has risen for the first time in more than 12 months, with an £8 increase taking the average up to £760.

Of the motorists who renewed their car insurance between July and September this year, 54 per cent saw their premiums go up by an average of £50.

The statistics, which came from a Confused.com survey of 2,000 drivers, may only show a one per cent increase, but this could be indicative of a change in direction for insurance premiums, which had been steadily decreasing until now.

The last time insurance prices took a similar turn was in the first quarter of 2015, when premiums crept up by £9. Over the following 12 months, there was a further jump of £115 or 19 per cent.

Interestingly, the data revealed that the cheapest time of day to buy car insurance is 8am, which saved some drivers up to £783.

Of those surveyed, 17-year-olds saw the biggest monetary change in their premiums, with the average price going up £64 or three per cent. Meanwhile, 26-year-olds were hit with the largest percentage increase, as the average cost rose by four per cent or £38.

The highest-paying age demographic is 18-year-olds, who are the only group with an average premium of more than £2,000. At the other end of the spectrum, drivers aged 60 or older are paying the lowest average, which now stands at £503.

Although the EU gender directive stops insurers discriminating between motorists based on their sex, men still have higher premiums on average due to the fact they tend to buy more powerful and expensive cars, as well as having a larger number of driving convictions.

Inner London is still the only region to pay an average premium of more than £1,000, but significant increases were seen in the East Midlands, West Midlands and South Central England.

On the other hand, Northern Ireland saw a regional price cut of £181 or 17 per cent, but the cheapest average is still £566 in South-west England.

Louise O’Shea, CEO of Confused.com, commented: “Over a year ago, we saw car insurance prices start to decrease, but now it seems prices may be changing direction and starting to creep up once again; and there is no telling how long it will be before they start to really accelerate.”

Average price of car insurance falls by £95

The cost of car insurance has fallen by an average of £95 over the last year, with the average cost of cover now standing at £752 thanks to an 11 per cent decline.

Analysis of more than six million car insurance quotes per quarter also shows that drivers shopping for new car insurance should search for replacement cover 21 days before their existing policy is due to expire, as this will achieve the best deal. Motorists who buy their insurance at this 21-day ‘sweet spot’ pay just £613 on average.

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Conversely, buying replacement cover on the same day an existing policy expires leads to drivers paying an average of £1,264, while drivers who stick with their existing insurer without shopping around pay £49 more on average.

Young drivers have benefited most from the falling cost of insurance, with 17-year-old drivers paying £403 less for insurance than they did 12 months ago. This trend is mainly attributed to the rise in black box telematics insurance policies.

The data, released by comparison site Confused.com and compiled by brokerage company Willis Towers Watson, also shows men pay an average of £92 more for their car insurance than women. This is partly attributed to data that indicates men tend drive more expensive, powerful cars, have a greater number of motoring convictions and make more expensive claims.

While Confused.com’s data is based on quotes rather than purchased policies, it nonetheless reflects a reduction in costs believed to be linked to insurers getting to grips with 2017’s Ogden rate reduction. The Ogden rate, also known as the discount rate, is used by UK courts to calculate how much accident victims will earn in interest from lump sum payouts awarded following a claim.

In March 2017, the Government lowered the Ogden rate from 2.5 per cent to 0.75 per cent, meaning claimants were predicted to make less from their investment payouts, and insurers would have to provide higher levels of compensation in order to make up for the difference.

Drivers paying £800 million a year for insurance add-ons

UK motorists were previously found to be paying more than £800 million each year for car insurance add-ons like breakdown cover and legal protection, which could be found cheaper elsewhere.

Analysis of annual accounts from four of the country’s leading insurance companies – Admiral, Esure, Direct Line and Hastings – also found administration fees for changing details, together with higher bills for those paying for insurance on a monthly basis, contributed to the £806 million figure.

One example cited by the study, carried out by the Daily Mail, found a driver paying £40 for legal protection when the same level of cover could be provided by an independent company for just £20. The research also found Admiral took an average of £64 from each car for add-ons.

In total, Admiral generated £203 million from add-ons in a year, Esure took £125 million, Direct Line brought in £179 million and Hastings raised £299 million. Admiral generated £56 million from drivers paying monthly rather than annually, while Hastings took £94 million from interest charges, and Esure charged £26 for drivers to change policy details.

Labour MP John Mann told the Mail: “Customers are being treated like a cash cow”, but the Association of British Insurers said the industry was strictly regulated, explaining: “Insurers have to disclose fees and charges, and want customers to understand the scope of cover provided so that they can make informed decisions about the right policy for their needs. Consumers should shop around, comparing the policies on offer and prices.”

Hastings insurance said: “Our ancillary fees and charges are in line with others in the market and our premiums are some of the most competitive”, while a statement from Esure explained that: “Instalment income has risen simply as a result of the company selling more policies and the higher average premiums being seen across the industry.”

Direct Line highlighted it did not charge administration fees for policy changes and monthly charges were communicated to customers clearly, while Admiral declined to comment.

Car insurance payouts hit all-time high

Meanwhile, the amount of money paid out by car insurance companies following a claim reached an all-time high last year, with the average cost of a claim standing at £2,936.

In the final quarter of 2017 the average payout stood at £2,838, while over 2013 and 2014 that figure stood at £2,160.

Total payouts for the industry – totalling £8.1 billion – remained roughly the same last year as they did in 2016.

The increase in the average amount paid out for claims was partly due to rising repair bills, according to the Association of British Insurers (ABI), which published the figures. The organisation has previously cited increasingly complex and tech-laden cars as factors driving up the cost of repairs.

The ABI also revealed personal injury claims were on the up, standing at £10,816 on average for the final quarter of 2017 – the highest quarterly figure since the second quarter of 2016.

And while the total number of personal injury claims fell slightly to 320,000 in 2017, the ABI said that number should be significantly lower due to a fall in the number of road traffic casualties and whiplash claims.

Rob Cummings, the ABI’s head of motor and liability, said: “Despite motor insurance remaining a highly competitive market, cost pressures saw the average price paid for motor insurance jump by 9% to a record high in 2017. Putting a lid on excessive costs, which end up being paid for by motorists, remains a priority for insurers.

“This makes it all the more important for the Government to play its part, by pushing ahead with its reforms to personal injury compensation without further delay.”

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