The average cost of both motor and home insurance fell during the first three months of this year, according to figures published by the AA today.
The insurer's latest quarterly UK premium index reveals that the average quoted premium for comprehensive motor insurance at the start of this month was £746.75 - down 1.4% from the £757.10 recorded three months earlier. Over the past year, prices have fallen by 4.1%. Prices are calculated by averaging the five cheapest quotes from both insurers and price comparison sites against a fixed basket of risks.
According to the AA, car insurance prices are benefitting from both competitive pressure and changing legislation. In particular, insurers are anticipating the impact of legal reforms introduced on April 1 to control injury claim costs, which included banning referral fees between claims companies, insurers and law firms.
Further measures will follow, which could include independent medical assessment of those claiming whiplash injury.
Simon Douglas, director of AA Insurance, said this would help to address Britain's status as the 'whiplash capital of Europe'. 'It's shameful that 70% of those in car crashes on Britain's roads are said to make a claim for injury even if no injury has been suffered, amounting to some 570,000 claims a year, costing £2bn. In France, for instance, only 3% of crashes result in a personal injury claim.'
Giving car insurers the ability to cross-check the details of those applying for cover against their official driving licence record next year will further bring down premiums, he added.
Meanwhile, cover for buildings insurance fell by 2.6% in the first quarter - down from £149.59 to £145.76, while for contents cover it dropped by 1.7% - down from £78.37 to £77.02. For combined buildings and contents cover, the average of the five cheapest premiums fell by 1.8%, from £199.34 to £195.66.
Over the past 12 months, the average price of buildings cover has fallen 1.7%, the cost of contents insurance has dropped by 2.4% and for combined cover the average best price recorded by the AA index has fallen by 1.4%.
The AA noted that these price drops came despite last year's flooding having cost insurers an estimated £1.2bn, and Douglas said the overall decline in prices was likely to be masking wide regional variations.
'Flood-affected homes will have seen big premium increases, especially if they have suffered two or three flood claims. They are also likely to see big increases in the excess - the amount a homeowner must pay towards a claim - for flood claims,' he said.
Douglas called on the government and insurance industry to finally reach agreement on a successor to the 'statement of principles', which guarantees homes at risk of flooding affordable insurance. The deal is set to expire in June, and failing to agree a replacement could mean insurance becomes out of reach for flood-affected families, he warned.
'Although the industry has come up with different proposals, the government is reluctant to underwrite them and that will be vital if there is a major flood catastrophe soon after an agreement is reached,' he said.
'I see no option but to extend the statement of principles for the time being, but it's not a satisfactory way forward - it was only ever seen as a temporary measure.'