UK motor rates fell 7.9% in 2014 despite end-of-year increases

The average premium for comprehensive car insurance in the UK fell by 7.9% to £594 in 2014 as a whole, according to the latest figures from the Confused/Towers Watson Car Insurance Price Index.

This was despite price increases towards the end of the year.

However, the increases did mean that the price drop in 2014 was smaller than the two previous years. Rates fell by 12.5% and 12.7% in 2013 and 2012 respectively.

According to the index, the average comprehensive motor premium increased by 2% in the fourth quarter of 2014, following a more modest 0.4% increase in the third quarter.

While small, the third quarter increase was significant because it was the first rise since the middle of 2011.

The average price for third party fire and theft (TPFT) cover increased by 0.9% in the fourth quarter of 2014 to £966, but fell 8.3% during the year as a whole.

Towers Watson head of UK property and casualty pricing Stephen Jones said: “The figures for the final quarter of 2014 have reinforced the increasing trend in pricing that emerged at the end of the last quarter, indicating that most insurers are moving to shore up their profitability.

“But it will have come too late to have much effect on 2014 underwriting performance.”

He added: “In 2013, reserve releases of nearly 10% helped UK motor insurers return their first underwriting profit since 1999.

“Given that claims submitted through The Claims Portal started to creep up again in 2014, after the initial drop caused by the 2013 legal reforms, it will be interesting to see how much gas may be left in the reserving tank to sustain underwriting profitability.”

Young drivers

Young drivers were the main beneficiaries of the 2014 price decreases, Towers Watson said. Those under 23 typically enjoyed double digit percentage reductions.

Competition for the business of 17-year-olds was particularly intense, fuelled by the rise in the number of telematics products on offer, with the average comprehensive premium falling by over 21% to £1,983 from £2,512 at the end of 2013.

On a regional basis, those benefitting most from rate cuts were drivers in Manchester and Merseyside, whose average premium of £807 remains the most expensive in the country outside Inner London, and those in the Scottish Borders who enjoy the lowest average premium at the end of 2014 of £397.

Drivers in south central England received the smallest price decrease in the year of 5.3%, thanks substantially to an average 3.9% fourth quarter increase.

Turning market?

The price increases at the end of the year appear to indicate that the UK motor market is turning.

Jones said: “Taking 2014 as a whole, the last three months have shown some realism returning to the market in the face of falling fuel prices leading to increased driving, increasing accident frequency and the lack, as yet, of definitive solutions to the credit hire and whiplash issues. If prices continue to rise, pricing and product innovation will come increasingly to the fore.”

Confused.com finance director Steve Sanders added: “These latest upwards price movements, for the second successive quarter, are likely to fuel further speculation that we have passed the bottom of the insurance price cycle.

“It’s the first time we’ve seen consecutive price rises from quarter to quarter since June 2011 and although the rise was marginal in Q3 2014 (£3), this latest rise is more substantial (£12). Though prices are still down year-on-year, some consumers have seen substantial price rises compared to last quarter.”

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