Motor claims surge sparks biggest premium jump in 5 years

Comprehensive car insurance premiums have made their biggest quarterly jump since 2010 as insurers begin to react strongly to the surge in motor claims.

Comprehensive premiums rose 4.8% in the third quarter, meaning motorist are now paying £29 more than they did at the start of July. 

And compared to this time last year, comprehensive premiums have shot up 8.1%.

The Towers Watson/Confused pricing index reveals that the average comprehensive premium is £629.

Third party fire and theft shot up 7% in the third quarter, taking the average premium up another £69 to £1056. The annual increase is more than 10%.

The price rises will come as bad news for motorists but relief for a number of motor insurers who have been grappling with claims inflation. 

Both frequency and severity have been on the rise driven by more cars on the road as the economy recovers and petrol prices falling.

Claims management companies getting used to the law reforms; the epidemic in nuisance phone calls/texts; and the competition watchdog’s failure to clamp down on the rising cost of motor repairs have also all been cited as a reasons for the claims spike.

The claims spike has in particular been around small bodily injury claims, causing problems for Esure which suffered a 21.3% drop in underlying profits at the half year. 

Towers Watson UK head of general insurance pricing Stephen Jones said: “The main story here is around a widespread market reaction to increasing claims costs, especially own vehicle damage claims.”

He added: “New technology such as telematics has helped to moderate premium increases for young drivers, as has a gradual return in the confidence of motor underwriters to compete for business in some segments of the market particularly impacted by Third Party Bodily Injury (TPBI) problems prior to the LASPO (The Legal Aid, Sentencing and Punishment of Offenders Act) reforms.

 “This shift in sentiment has led to much greater competition for some risks, including young driver business, than was evident during the depths of the bodily injury claims crisis.”

Confused finance director Steve Sanders said the government’s insurance premium tax rise from 6 to 9.5% would mean the market is ‘likely to see continued inflation in car insurance prices across the rest of 2015 and into 2016.’