Car Insurance Premiums - biggest annual rise since 2011

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Car insurance premiums have undergone the biggest annual rise since 2011.  New research has found that premiums for comprehensive car insurance continued to rise in the last quarter of 2015, with an average 13.2% annual increase over 2014.

According to the latest Car Insurance Price Index1, which is based on data from nearly two million customer quotes and produced by Confused.com and Willis Towers Watson, the average premium has now reached £672.

One factor behind the rise in insurance prices is the hike in Insurance Premium Tax, which was announced in George Osborne’s Budget last July and introduced in November.  Subsequently the tax rate on motor and home policies, among others, rose from 6% to 9.5%. Analysts had originally thought this would likely lead to an increase in motor premiums of around £20 but the actual uplift is more than double the predicted figure, so there are other factors at play.

Stephen Jones, UK head of property and casualty pricing at Willis Towers Watson, said: “The recent increase to insurance premium tax along with inflationary pressures on claims costs, especially to vehicle damage repair costs, have been the major factors driving up prices.

“Even though improved vehicle safety features will very likely reduce claims frequency in the longer term, the immediate effect of installing expensive accident avoidance technology, often positioned in those parts of the car most vulnerable to impact damage, is higher repair costs.” 2

Significant variations according to age and location

The index revealed that drivers aged between 17 and 20 had incurred the lowest increases in the past 12 months, with women in this age group experiencing annual rise in insurance costs of just 3.9% to £1,558.

Almost every other age group had been affected by “double-digit increases”, with female drivers aged over 71 getting a 19% annual rise in prices to £360. Male drivers aged between 61 and 65 saw the biggest quarterly increase of 10.2% to £437.

The cost rose across all regions, but drivers in Northern Ireland were “worst off” with their premiums rising on average by 18% over the past year, an increase of £125 to £810. 

The trend seems likely to continue

Steve Fletcher, head of data services at Confused.com, said: “Unfortunately for motorists, we’ve now seen 11 consecutive months with no premium decreases, which would suggest that the trend is likely to continue. If this is to be the case, we would expect the average comprehensive cover premium to soon exceed the £858 per year high we saw during 2011.”

The best advice is to ‘shop around’

We advise motorists to ‘shop around’ to get the best prices when it’s time to renew car insurance.   You cannot guarantee that your current insurer will offer you the best deal for the level of cover you seek.  CareandCompare.com will enable you to find great deals quickly and efficiently, with over 100 insurers searched in minutes.  Click the 'Get Quotes' button below to compare car insurance prices. 

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References

1.  http://www.confused.com/car-insurance/price-index

2.  http://www.theactuary.com/news/2016/01/car-insurance-premiums-biggest-annual-rise-since-2011/#sthash.2hv9dup6.dpuf