Prices in UK motor rise ‘dramatically’
Premiums for all types of motor insurance in the UK increased dramatically in the final quarter of 2017, according to the latest Insurance Price Index from the British Insurance Brokers’ Association (BIBA).
The index tracks £6 billion of annual premiums paid via insurance brokers for personal motor insurance, commercial vehicles and motor fleets before Insurance Premium Tax (IPT). The index compares the premiums on a quarter on quarter basis.
Each one of the three types of motor insurance showed increases with the main effect felt by car and van drivers whose premiums have risen consistently through 2017. The 2017 fourth quarter premiums showed a 10.7 percent increase for car drivers and 9.1 percent for van drivers over the same period in 2016 before Insurance Premium Tax (IPT) is added.
The cost of motor insurance has been affected by several factors. A scourge of fraudulent whiplash claims has led to increased costs to the insurance industry. In 2016 the cost of motor insurance fraud alone reached £780 million through more than 68,000 detected cases, estimated to add some £50 to the honest motorist’s premium, according to BIBA.
In March 2017, the government dealt a blow to the sector when the Lord Chancellor announced a change to the discount rate used to calculate compensation amounts for catastrophic injuries including those from road accidents. This immediately meant that claims figures needed to be increased to reflect the change and this has been reflected in the cost of motor insurance over the second half of 2017.
In further bad news for policyholders, the rate of Insurance Premium Tax has doubled since 2015, reaching 12 percent in June 2017, meaning that the average car driver pays nearly £60 in tax and SME’s forking out nearly £200 in tax just to insure their van.
“There are a number of reasons that motor insurance premiums have risen and BIBA is campaigning on all of them,” said Graeme Trudgill, BIBA executive director. “We are pushing for legislation to be passed via the Financial Guidance and Claims Bill which will bring Claims Management Companies under the regulatory auspices of the FCA. We also await the progress of the Civil Liability Bill to enable the recommendations of the Insurance Fraud Taskforce to be implemented; which will reduce the rate of fraudulent claims.
“We also fed into the government review of changes to the compensation discount rate and are calling for legislation to be brought forward that will implement changes that will ensure the principle to the 100 percent compensation for injury claims is met.
“And finally, BIBA has long campaigned for a fair system of taxation. We believe that Insurance Premium Tax is a tax on protection and is now at a level that impacts the uptake of insurance. We want the Chancellor of the Exchequer to commit to no further increases in this regressive tax.”
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