Motor insurance premiums reach record level, according to ABI
Motor insurance premiums hit their highest recorded levels in the fourth quarter of 2016 and rose more than five times the rate of inflation in the full year, according to the Association of British Insurers.
The driver for the price hike is pressure on premiums through tax increases, higher repair costs and the rising costs of whiplash style injury claims, the lobby group noted.
In the fourth quarter of 2016, the average price paid for private comprehensive insurance was £462, the highest figure previously recorded was £443, in Q2 2012.
The price in the fourth quarter of 2016 was up 4.9 percent on the previous quarter, adding an extra £22 to the average premium. This is the second highest quarterly increase recorded.
The average premium over the whole of 2016 is now 9.3 percent higher than the average premium over the whole of 2015, according to ABI’s Motor Premium Tracker, a survey measuring prices consumers actually pay for their motor cover, rather than quotes.
Rob Cummings, ABI’s assistant director, head of motor and liability, said: “These continue to be tough times for honest motorists. They are bearing the brunt of a cocktail of rising costs associated with increasing whiplash style claims, rising repair bills and a higher rate of Insurance Premium Tax.
“While we support the Government’s further reforms to tackle lower value whiplash costs, it must not give with one hand and take away with the other. The sudden decision to review the discount rate has the potential to turn a drama into a crisis, with a significant cut throwing fuel on the fire in terms of premiums.
“Insurers are open to a proper dialogue on how to reform the system and urge the Lord Chancellor to engage with the industry about setting a rate that is fair for both claimants and customers.“
The new figures come amidst concern that the Ministry of Justice could be about to pile more pressure on motor premiums through a cut in the discount rate – a mechanism used by the courts to adjust large compensation payments to take account of future investment returns, ABI noted.
The discount rate adjusts amounts of money awarded as personal injury damages to take into account the return which can be expected when that lump sum is invested. Since 2001 it has been set at 2.5 percent.
Since the Budget in July 2015 there have been three separate increases in the rate of Insurance Premium Tax, which means that the tax will have doubled from 6 percent to 12 percent when the latest rise comes into effect on June 1 this year.
The average bodily injury claim settled in Q3 2016 came to £10,674 - a 2.3 percent increase on the same period last year.
The average repair bill has risen by nearly 32 percent in the last three years to £1,678 in Q3 2016. This is due to increasingly complex vehicle technology and rising cost of spare parts due to currency fluctuations.
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