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The Actuary The magazine of the Institute & Faculty of Actuaries

Car insurance price rises stabilise in Q2

Car insurance prices stabilised further in the second quarter of 2011, according to the latest Confused.com/Towers Watson Car Insurance Price Index.

The average price of a comprehensive policy rose by 2.7% between April and June to £858 - the smallest quarterly percentage increase for nearly two years. The annual rate of increase has slowed to 25% from a peak of nearly 38% at the end of 2010. TPFT cover rose by 1% in the quarter and 33% over the 12 months to the end of June. The average TPFT premium now stands at £1,132, an increase of £11 in the quarter.

The deceleration in price increases comes despite recent figures that showed one in four UK third-party motor claims involved an element of bodily injury (www.TheActuary.com/875846), as well as Towers Watson analysis that showed the private motor insurance industry as a whole paid out £1.24 for every pound of premium received in 2010.

Duncan Anderson, director, Towers Watson, said: "With the price increases of 2010 starting to have an effect on 2011 performance, some companies seem to be easing off increases in what is still an intensely competitive market. Whether, given recent claims inflation, the market as a whole has moved rates up enough to move into profitability is, however, far from clear.

"Effective claims management and fraud prevention remains key, as does appropriately reflecting changing bodily injury experience in premium rating structures. Enhanced use of geographical and vehicle data will also become more important in light of the fact insurers won’t be able to use gender set prices from the end of next year."