COVID-19 uncertainty drives price fluctuations in UK motor market: WTW
Car insurance premiums have fallen in the first quarter of 2020, although uncertainty is driving continued price fluctuations in UK motor premiums, reveals a new report by Willis Towers Watson.
According to Confused.com's Car Insurance Price Index, premiums have fallen by 1 percent (£6) in the first quarter of 2020. The average cost of car insurance is now £809, following a £47 (6 percent) increase over the past year.
The report, however, highlighted an underlying, gradually increasing trend that reflects inflationary and one-off cost pressures.
“Notwithstanding the specific impacts of COVID-19 on driving behaviours, the current situation makes future prediction of claims inflation, the timing of the Civil Liabilities Bill implementation and the impact on future reinsurance costs all the more challenging,” said Graham Wright, UK lead of P&C personal lines pricing at Willis Towers Watson.
He added: “Premium levels for the first quarter have continued to fluctuate monthly with little evidence of an emerging overall trend, which reflects the uncertainties faced by the market and the challenge of balancing conflicting future trends.
“The index data represents a largely pre-Covid period and does not yet give insights into the market’s pricing response to Covid-19, although there is widespread recognition of claim frequency reductions whilst lockdown measures persist and acknowledgement that these may be offset to some degree by severity increases, all of which adds to the uncertainty in the market.”
Drivers in Central and North Wales benefited from the greatest quarterly drop in prices, with their insurance premiums decreasing on average by 3 percent (£22) to £637. The Scottish Borders and the East Midlands were the two regions in the UK to experience the largest rise in the cost of comprehensive car insurance, with premiums increasing by 2 percent (£10) and 1 percent (£11) respectively.
Steve Fletcher, head of data services at Confused.com, said: “If there’s one thing we know for certain it’s that insurers don’t like uncertainty. There is evidence to suggest that it will be a while before prices calm down and that they will continue on the upward trajectory we’ve seen over the past year and a half.
“While we don’t expect insurers to introduce discounts to account for fewer miles being driven, people are looking to make savings at this financially challenging time. The winners will be the insurers that listen to customer needs and simultaneously react to market movements. Societal uncertainty means insurers will need to closely follow this situation as it unfolds.”
