Motor premiums heading for £900 – Confused.com/WTW

Motor premiums are on average £60 more expensive than a year ago, according to the latest Confused.com Car Insurance Price Index in association with Willis Towers Watson.

And further increases in the pipeline could push the average comprehensive policy over £900 for the first time.

Premiums are 8% more than they were a year ago, even though rates saw a second consecutive quarter-on-quarter drop in prices in the final quarter of 2017. In October-December, prices fell by an average of 1.3% from the previous quarter, which was the largest quarterly reduction in more than three years.

According to the Index, which is based on price data compiled from almost six million customer quotes per quarter, the average premium rose from £579 in June 2014 to a peak of £847 in June 2017.

This latest fall in premiums, one of only three quarterly reductions seen since September 2014, means that the average comprehensive premium is now £827 per year, or £11 lower than in September 2017. While average premiums rose by £60, or almost 8%, over the last 12 months, this represents a significant deceleration compared to recent Index results which have recorded an average year-on-year increase of £110 for the previous six quarters, the report noted.

According to Willis Towers Watson, prices fell in early part of the fourth quarter, in anticipation of an adjustment to the Ogden rate, which had been cut earlier in the year. However, towards the end of the quarter prices edged back up after the government announced on 30 November that there would be a delay in setting the new Ogden rate.

Stephen Jones, UK head of P&C pricing, claims, product and underwriting at Willis Towers Watson, commented: “While the second quarterly drop and annual deceleration in premiums will be positive news for drivers, the marginal price increases seen at the end of the year suggest a level of uncertainty and volatility will continue to trouble the market into 2018, particularly concerning the impact of ongoing developments relating to Ogden.”

Louise O’Shea, chief executive of Confused.com said: “Based on the current 8% year-on-year rise we expect average comprehensive premiums to exceed £900 by the end of this year. Despite the quarterly drop we have already seen volatile pricing, with the latest figures showing a 0.4% increase in December. We also anticipate a reinsurance rate increase following last year’s Ogden rate drop, which will further impact the direction of prices.”

In contrast to results from Q3 2017, when the majority of age groups still experienced double digit percentage increases compared to the same period in 2016, most drivers in the final quarter of 2017 benefited from a significant deceleration in their average annual premiums. Female insured-only drivers aged between 56-60, for example, saw the annual increase of their premiums drop from 18.8% to 2% in the last three months. For the first time in two years, some drivers even benefited from an annual drop in premium prices, with male drivers aged 66-70 who have an additional two drivers or more on their comprehensive policy seeing their premiums cut by 2.7%, equating to an average annual premium cut from £758 to £738.

Across the country, the fall in prices experienced by most regions over the third quarter of 2017 continued in to the last three months of the year. The biggest quarterly reduction, of 8.9%, was seen in the Scottish Borders, reducing average annual premiums to £623. One or two regions did buck this trend, with drivers in the North Midlands and East/ North-East of Scotland experiencing quarterly increases of 1.3% and 2.3% respectively.

The biggest annual decrease in prices were felt in East London, where annual motor insurance prices fell on average by 0.8% from £1,545 to £1,471. Highlighting the fluctuating premiums drivers face depending on where they live, drivers in the City of London were hit by the highest annual increase of 33.4%, taking their average premiums to £1,599 and, for the first time since 2009, making it the most expensive location in the country for car insurance. The cheapest place for motor insurance in the UK is Llandridod Wells in Wales, where drivers were paying an average of £574 at the end of 2017 for comprehensive car insurance.

Jones noted: “After a tough year for insurers in 2016, motor insurers saw an uplift in prospects following last year’s proposed Ogden rate revision. However, insurers still face a number of uncertainties in 2018, including the risk that Brexit negotiations will push the Civil Liability Bill into the slow lane, which may also impact the timing of changes to the discount rate. In addition, there is always the possibility of further increases in Insurance Premium Tax, and ongoing pressures on repair costs from the weakness of Sterling and increasing repair complexity.”