Motor insurance rate increases start to slow

Private motor insurance premiums rose strongly again in the third quarter but are showing signs of slowing, according to the latest edition of the Confused.com/EMB Car Insurance Price Index (CIPI).

The average cost of comprehensive cover rose by 8.6% between July and September, a smaller increase than the 14.2% of last quarter, but maintaining the steady upward trend of the last 12-18 months. Prices have risen by 37.5% in the 12 months since October 2009.

As a result, the average premium for comprehensive cover rose by £51 in the quarter to £650.

The index reveals that those buying third party, fire and theft (TPFT) policies, most commonly younger drivers, have faced even higher increases – 11.7% this quarter on top of 18.4% in the second quarter. This makes the rise 54.2% over the last 12 months.

EMB partner, Peter Lee, said: “The price corrections that have been taking place over the past year or so have been essential to getting many private motor insurers back on an even keel after poor 2009 results. The scale of bodily injury claims inflation revealed in a recent study of 85% of the private motor market has emphasised the need for price rises.”

He added: “However, the level of increases is starting to slow down; with each month in the quarter showing flatter price rises than the previous one. Medium-term I think there’s a realisation of the need for additional strategies for dealing with rampant bodily injury costs and managing fraudulent behaviour such as the wider use of risk indicative external data.”

The index shows that the youngest drivers were targeted for the highest increases in the quarter.

The average cost of comprehensive cover for a 17-20 year old man has risen by 10.9% since the end of June, giving an average premium of £2,879. Insurers also continued to penalise the practice of ‘fronting’ with 46-50 year old men and women with an insured plus one policy having received increases of 65.6% and 60.3% respectively over the last 12 months.

Overall price rises for drivers in the 41-50 age bracket reveal the existence of some potential ‘fronting’ hotspots, notably London and Northern Ireland.

Darren Black, Confused.com head of motoring, said: “Consumers can at least take some comfort from the fact that car insurance price rises appear to be easing off."

This morning the AA said it had recorded the biggest ever rise in car insurance premiums.