Comprehensive motor rates rise for first time since 2011

The average cost of a new comprehensive motor policy edged up to £582 in the third quarter of 2014, according to the Confused.com/Towers Watson Car Insurance Price Index.

This in turn has had a dampening effect on the rate reductions seen over the past 12 months.

While the increase was small at 0.4%, it is the first rise in the average comprehensive motor rate since the middle of 2011.

The average premium for third-party fire and theft cover also increased slightly by 0.2%.

The index found that price movements in the quarter affected consumers in different ways.

Drivers aged below 25, who have been the greatest beneficiaries of the price reductions in recent quarters, generally saw the largest and most consistent increases.

For example, drivers aged 19 or 20 saw increases of around 3%, while drivers in their mid-40s enjoyed further price cuts, ranging from 1% to 2.8%.

Policies insuring a single driver averaged increases of 1.8%, while prices for multi-driver policies continued a mild downward trend, Towers Watson said.

Towers Watson’s UK head of property and casualty pricing Stephen Jones said: “The latest quarter has provided a real mixed bag of modest up and down pricing impacts on consumers, making it difficult to call how and in which general direction prices might move next.

“One additional factor to take into account will be insurer reaction to the Competition and Market Authority decision at the very end of the third quarter not to address the issue of temporary car replacement costs.

“Some insurers may have been anticipating favourable reform to support premium rates impacted by general inflationary pressures.”

Dampening effect

While the third-quarter price reductions were small, the index showed that they had a dampening effect on the annualised rate of reduction.

Across the UK, average comprehensive premiums have fallen by 10.7%, or £70, since the end of September 2013, compared with 14.6% for the 12 months to June 2014.

Drivers in Manchester and Merseyside have seen the largest annual savings of nearly 13%.

Over the same period, 17- and 18-year-olds across the UK have enjoyed average premium savings of well over 20%, partly as a result of the wider availability of telematics policies. New TPFT premiums have also fallen by an average of 9.4%, or £99, in the last 12 months.

Jones said: “Recent price cuts were heavily predicated on third party injury claims costs reducing as a result of the LASPO [Legal Aid, Sentencing and Punishment of Offenders Act 2012] reforms, but the last few months have seen the number of claims notifications to the Claims Portal creeping up again.

“Insurers will need to watch this and their own developing claims experience when adjusting new and renewal policy prices over the coming months.”

Confused.com finance director Steve Sanders said: “The decreases in car insurance premiums that we’ve been experiencing for the last three years have been welcome news for motorists. Over recent months, however, the heat has certainly come out of these price reductions. Our latest figures suggest that these price drops are now levelling out, with premiums actually rising over the last quarter to now stand at £582.”