AA Q1 index finds premiums for car and home insurance have not increased as anticipated
Premium hikes widely predicted for both car and home insurance because of increasing costs and the aftermath of last year’s flooding are not being realised, the latest benchmark AA British Insurance Premium Index reveals.
After a year of increases that have added nearly 6 per cent to the average annual premium quoted for comprehensive car insurance, the Index recorded a slight fall. It now stands at £682, just £3 less than at the end of 2007 but £37 more than this time last year.
Similarly, the first quarter of 2008 shows average quoted premium for buildings cover remaining at about £209 while contents insurance rose by just 1 per cent to £129. The average premium for combined buildings and contents cover, recorded for the first time in the AA study, has fallen by £4 to £293.
Andrew Strong, chief executive officer of AA Insurance, said: “A recent Datamonitor report suggested that the car insurance industry could become profitable by the end of 2009. But we calculate that an annual premium increase of 20% would be needed to achieve that. The latest AA Index shows that this is a far from realistic expectation.
“Similarly, speculation that home insurance premiums would rocket because of last year’s floods was clearly wrong. But I do expect premiums to continue rising over the remainder of the year.”
Car insurance premiums levelled off during the first quarter, reflecting the pattern of 2007 although the trend is upward.
“March is a peak period for car insurance sales with many companies holding rates to gain market share,” Strong said. “But insurers continue to be squeezed between increasing costs such as legal expenses and personal injury claims, and competitive pressure. For every £100 taken in premiums, the industry shells out £112 in claims. If premiums don’t continue to rise at a realistic rate, there will be a point when large premium increases become inevitable. That would unhelpful for customers and will damage the reputation of the industry.”
The Shoparound Index for comprehensive insurance (an average of the cheapest three premiums for each Index risk) also fell 1.2 per cent to £459.44.
