Comprehensive car insurance premiums grew by an average of £35 in the last quarter of 2016, pushing current rates up to the highest levels seen since 2013.
According to the AA’s British Insurance Premium Index, motorists were charged an average of £633.06 for a year of comprehensive coverage in December, which is 5.8% more than they would have been charged three months earlier.
2016 as a whole saw comprehensive premiums grow by 11.7%, continuing a trend that has been in place since 2014. Third party, fire and theft premiums, which are mostly taken out by younger drivers, grew at an even fast rate, with premiums up by 19.4% compared with 2015.
Michael Lloyd, the AA’s director of insurance, cites uninsured drivers as a key reason for the increase. “I also believe the increases in Insurance Premium Tax – which will rise another 2% in June - and fraud continue to dog the industry,” he added.
Lloyd said most fraudulent claims are linked to unnecessary payouts for whiplash. “Claiming for an injury even if none was suffered is so embedded in British culture that 44% of respondents [to a recent AA study] agreed that making a claim for injury has become ‘an easy way to make money’”, he continued.
Another factor for the rising premiums is the growing cost of average repairs. David Brown, insurance partner at KPMG UK, said “The cost of accidental damage is rising fast so fast I believe it’s becoming a much bigger threat to motor policy price inflation than whiplash.
Brown explained that insurers had seen a 20% increase in the average cost for accident repairs. “I expect that when new figures come out over the next few months, there may be more bad news with costlier accidental damage repairs which may well lead to premiums suffering further upward hikes,” he added.
Lloyd said that young drivers are particularly hard hit by the rising premiums, and that the hike was fuelling growth in the number of uninsured drivers. “We join the British Insurance Brokers’ Association in calling on the government cut Insurance Premium Tax from the premiums paid by young drivers for the first two years of their cover,” he said. “It will help with the affordability of cover as they build up a no-claim bonus as well as ensure that they start driving legally.”