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07

Average car insurance premium increases for the first time in three years

Open-access content 16th July 2015

The average car insurance premium has increased to £600 in Q2 2015, which is £21 more then they were this time last year according to research.

2

Confused.com said drivers enjoyed three years of continually falling premiums, but in the last 12 months saw an average increase of 3.6%. 

The average premium for men now costs £627 - a year-on-year increase of £25 (4%), while women now pay £566 for car insurance, which is a £15 increase (3%).

Confused.com's car insurance price index, produced in association with Towers Watson, said most drivers were facing increases across the UK but drivers aged 17 had seen their premiums reduced by 6.4% (£128).

This means this age group has its "lowest ever premiums", with the average premium at £1,869. This is 50% less than in Q3 in 2013 when policies for this group cost on average £3,729.

Compared with other ages, drivers aged 59 and 63 have seen the greatest average annual premium increase, at 7.8%. Average premiums for 59-year-olds have increased by £28 to £384 and 63 year-olds now pay £371, a £27 increase from Q2 2014.

Steve Sanders, finance director at Confused.com said: "Despite enjoying a brief reprieve in the first quarter of 2015, market movements in the last 12 months suggest consumers should prepare themselves for price rises to continue for the rest of 2015. The last time we saw this sort of premium change pattern we were at the beginning of three years of consecutive comprehensive premium increases."

Karl Murphy, UK property and casualty insurance leader at Towers Watson, said improving economic conditions could be a "double-edged sword" as increasing car sales and road usage had a direct impact on higher accident levels and claims figures, therefore pushing premiums "steadily upwards".

Towers Watson said motor vehicle usage levels reached a total of 312.4 billion miles in the year ending March 2015. This is an increase of 1.8% compared to the same period in 2014, according to the Department for Transport.

Murphy said: "Without doubt, the biggest pricing issue for motor insurers is the level of claims and how, potentially, regulation and a generally improving national economy may affect this."

Last week chancellor George Osborne announced in his budget statement a rise in insurance premium tax to 9.5% from November. The industry estimated this would add between £12-13 to an annual car insurance bill. 

This article appeared in our July 2015 issue of The Actuary.
Click here to view this issue
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