Car insurance price rises "in reverse" as Ogden effect spreads

Following a Government U-turn, the rise in car insurance premiums went into reverse during the last three months of 2017, new analysis from Consumer Intelligence shows.

Car insurance bills have increased by 9.6% in the past year, three times inflation, to £837 but overall prices dropped in the last quarter.

The Government review of the Ogden rate, which sets pay-outs for major personal injury claims, has enabled insurers to reverse rises; confirmation of the new rate of between 0% and 1% could spell even further cuts.

Average premiums dropped by 1.7% in the three months ending December, with under-25s benefiting the most – their average premiums are up 2% in the past year to £1,953.

Also, thanks to black box technology, younger motorists are limiting their insurance bills. Around 59% of the most competitive quotes are from telematics providers.

Over-50s experienced the biggest increase in premiums, up 11.8%, but still pay considerably less than under-25s. Their average price is just £395 per year.

John Blevins, Consumer Intelligence pricing expert said: “The discount rate review and no rise in Insurance Premium Tax in the last Budget is a welcome relief for drivers. Further price cuts are possible when the new discount rate is set. The challenge is determining when that might be.

“Average premiums, however, are still 9.6% higher than a year ago, with the discount rate and tax rises the main drivers – but it is not all about the Government.

“Increased theft claims last year are driving price rises and the weakness of the pound means importing parts costs more. Price differences around the country are being determined by the cost of claims, and the same applies to price rises for the over-50s.”

When it comes to location, Londoners are still paying the most. They pay on average £1,217, which is more than double the cheapest at £606 for the south west of England.

However, drivers in the northeast felt the biggest increase in premiums, 15% up from the year before to £858. Below is a rundown of average premium and how much they increased in 2017 depending on the area.