- Cyberattacks cost financial services firms more to address and contain than in any other industry according to new Accenture report
- Beazley 2018 Breach Briefing report analyses and advises on growing range of cyber risks in the US
- Insurance Europe responds to IAIS consultation on an activities-based approach (ABA) to systemic risk
- RSA UK claims function awarded CII Chartered status
- LMA introduces Claims Development Pathway, a new interactive training and development tool
- FCA seeking views on how technology can make it easier for firms to meet their regulatory reporting requirements
- S&P Global Ratings and Guidewire Cyence Risk Analytics partner to assess cyber risk expired
- IRM Internal Model Industry Forum(IMIF) publishes eighth guidance document for the insurance market-The Journey from Model Validation to Model Risk Management expired
- Legal & General partners with Slice Labs to offer on-demand homeshare insurance proposition expired
- Zurich launches UK Innovation Foundry expired
- Aegon net income more than doubles in fourth quarter as US tax reform leads to one-time tax benefit expired
- Chaucer DAC joins IUA expired
11th October 2017
UK car insurance prices dip but it could be short-lived says Willis Towers Watson/Confused.com latest survey
UK comprehensive car insurance premiums have fallen by an average of 1.1% in the third quarter of 2017, the largest quarterly reduction in premiums seen in more than three years, according to the latest Confused.com Car Insurance Price Index in association with Willis Towers Watson. This reduction follows one of the sharpest rises on record seen in the previous quarter as average premiums rose by more than £100, or by nearly 14%, over the most recent 12 months.
The fall in premiums, one of only two quarterly reductions seen since September 2014, means that the average comprehensive premium is now £838 per year, or £9 lower than in June 2017. The reduction bucks the recent strong upward trend which has seen the average premium rise from £579 in June 2014 to the current level of £838.
According to Willis Towers Watson, the reduced prices this quarter reflect in particular insurers’ reactions to the recent announcement of a proposed change in the basis of the calculation of the Ogden discount rate, which determines the basis of settlement and so cost to insurers of the very largest personal injury claims. The monthly version of the Index shows that prices started to fall in July as insurers perhaps anticipated the Ogden announcement. However, according to monthly index analysis, flat pricing in August and a slight rise in September suggest that the underlying effects driving recent trends towards higher premiums may still be at play.
Stephen Jones, UK head of P&C Pricing, Claims, Product and Underwriting at Willis Towers Watson, comments “This slight fall in premiums in Q3 logically reflects insurer reaction to the latest developments on Ogden, with pricing adjusted to reflect an anticipated future rate of perhaps between 0% and 1%, rather than the rate of -0.75% previously mooted. Market observers have been keen to identify any signs that the market is finally turning, but the continuing mild increases towards the end of the quarter suggest that the turning point is yet to be reached.”
Despite the slight fall in prices this quarter, during the past 12 months most age groups have experienced double digit percentage increases, with drivers aged 61 hit hardest by increases of 23%, equating to average annual premiums of £526. Drivers aged 18 have experienced the lowest annual increase at 7.4% but pay amongst the highest average annual premiums at £2,266.
Jones added “With uncertainty still surrounding the Ogden discount rate, as well as unknown timings around the Civil Liability Bill, pressures on repair costs from the weakness of Sterling and increasing repair complexity, plus the possibility of further increases in Insurance Premium Tax towards the VAT rate, there is still considerable uncertainty in the market around the future direction of rates.”
Steve Fletcher, head of Data Services at Confused.com said “With car insurance costs rising by 65% over the last decade and 14% in the last year it’s no wonder drivers are dreading their next renewal date.
The dramatic Ogden rate cut from 2.5% to -0.75% in February 2017 sparked a surge of car insurance price hikes across the UK, in an already inflating market, as insurers braced themselves to pay out more for personal injury claims. A recent (September 2017) government announcement regarding the way rates are set could increase the rate up to 1%. This could explain why insurers have been able to calm their pricing slightly this quarter. Even so, we expect this will be short lived given that prices have already started to rise again in September.
Worryingly, there is every possibility that car insurance prices will be the most expensive on record during the first half of next year. Luckily, insurers are required to show drivers what they paid for their car insurance last year at point of renewal. Drivers wanting to make savings should take note of their renewal price and take a few minutes to get a comparable quote online at Confused.com, where they could save up to £289.”
Willis Towers Watson Trends(106 articles)
Confused.com Trends(24 articles)