The Association of British Insurers has revealed that the average insurance premium has risen in price by 11% to £498 per year; the quickest price rise yet recorded.
Premiums rose from £480 to £498 between May and June, up from £473 in April. The youngest and oldest drivers are expected to bear the brunt of the increases, because these are typically charged the highest price for insurance. This 11% rise is four times the level of inflation.
Premiums are expected to rise further in January. Director general of the ABI, Huw Evans, didn’t speculate on how much they would increase by in the new year, but did clarify that renewals were likely to be adjusted to reflect the higher cost to insurers from the personal injury discount rate change, causing the average to climb higher.
This adjustment of personal injury discount rate - which the government cut from 2.5% to -0.75% in February - will be debated in the House of Lords today. There was no impact assessment submitted with the change, which caused upset amongst the House’s Secondary Legislation Committee.
A spokesman for comparison site GoCompare said: “Inflation is back on the UK economic radar anyway, but in car insurance there are specific external inflationary pressures on top. As a result, motorists are caught in a perfect storm of rising prices with changes to Insurance Premium Tax (IPT) and the Personal Injury Discount Rate now beginning to wash through into renewal prices.
"IPT alone has doubled since November 2015, up from 6% to 12%, following the latest rise last month. Any charge that is levied as a percentage of car insurance premiums is likely to hit those who already face the highest premiums the hardest."